The Breakdown - The Five Most Important Stories in Crypto Last Week [Pre-Election Edition]

Episode Date: November 3, 2024

NLW and Scott Melker chat live on 11.1.24 to discuss the most important stories in crypto this week, including Saylor's big buy, BTC stuck at $70k, and more. 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 Friday, November 1st, 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 of the show notes or go to bit.ly slash breakdown pod. All right, friends, we are back with another Friday 5. with me and Scott Melker. And today's episode, I think, is just a perfect encapsulation of the last

three to six months, which have been totally defined by the election cycle, by the ETFs. We get a chance today to kind of summarize all of that and take a pulse on where we are in our last Friday five before the U.S. presidential elections. It's a good one, so let's dive in. Another week where it seems like a thousand things happened. We're no longer in the boring stages of this cycle. Good morning, man. How are you? Great. How are you? I'm doing well. I'm McLaren. You are Mercedes again. We didn't plan it. We didn't plan it, but it's happening. So listen, we got to give an honorable mention really quick just because it happened this morning. We obviously got non-farm payroll job numbers and I had to check four times to see if this

was correct. The U.S. economy adds 12,000 jobs in October. The expectation was 106,000. This is the lowest print since July 2021. Now, unemployment was in line, but these are exceptionally low job numbers. And surprise, guys, I know you're not going to believe this, but they revised the last two strong months down 81,000 in August from 159 to 78 and September. That huge print we had, down 31 to 250 from 254 to 223. And just days before the election here, you can't believe these numbers anymore, man. We haven't been able to forever.

It's like, when haven't we, like, had a revision downward at this point? It'll be fascinated to see if this really moves the needle at all or if it's sort of just so incidental relative to pre-election, just hold on and see what happens next. That's kind of my base case of how it plays out in practice. Yeah, I tend to agree with you. And I think this just gives the Fed the cover they need for another cut. Yeah, I mean, honestly, my, that's to me, the story is like maybe they weren't going to again and now they're going to cut again.

It feels, to be honest, it does feel like the type of thing where, so we're seeing an immediate market reaction down, but it kind of feels like really inevitably when the market sort of like takes a step back, I think that they're going to come to that exact same conclusion that you are, that, you know, any question of whether there is going to be sort of like a pause might be out for this cycle. So I don't know, part of what the market had been trying to figure out is if rate cuts were, you know, sort of bullish because things were normalizing or bearish because things were going bad. And so this is in the bad column. But I, I tend to think that there's sort of an initial reaction where the market is trying to figure that out.

And then they remember they're getting a rate cut either way and then they get happy again. So, yeah, exactly right. I think futures dumped and then pumped kind of immediately the usual like knee-jerk reactions in both directions. So I think our first story here is kind of Bitcoin price action, obviously, because I think, you know, technical analysts have been watching that 6970 level. Let's finally get back above that. Well, we did. And we've been relatively good at staying there for the moment.

Bitcoin price takes breather as Bitcoin ETFs record another day of monster inflows. We've got BlackRock Bitcoin ETF getting record inflow ahead of U.S. election. And then, of course, Bitcoin price drop leads to 250 million bullish liquidations. Crypto sentiment indicator singles top. That's the extreme greed that we've been having. And then we need narratives for why we barely made it back to 70,000. Bitcoin's run toward record high falters as Trump election odds dip. So much going on here.

All I see is Bitcoin went up really far, really fast, and then all the leverage got flushed. And here we are right back at an amazing level of 70,000. Yeah. You know, I think that the bummer for me, which is, you know, a very silly bummer to have, but this is sort of like the closest we've ever had to being able to make a new all-time high on Bitcoin White Paper Day. And we just couldn't get it done. I mean, I feel like some whales should have taken one for the team, you know,

just sort of mass smash the bid button and gotten it done. But we are now officially the longest period of time at which Bitcoin has been above 70,000. It's kind of the type of moment where you so anticipate, you know, they're wanting to get above that. It's that consolation prize of this sort of being in totally uncharted territory kind of goes out the window. It is weird, though. I mean, plenty of people have commented on the divergence between the price and the sentiment. Agree. And you sort of mentioned Bitcoin Satoshi White Paper Day.

We've got a tweet from Donald Trump. I would like to wish our great Bitcoiners a happy 16th anniversary of Satoshi's white paper. We will end Kamala's war on crypto and Bitcoin will be made in the USA, vote Trump. And then, of course, Hunter Horsley from Bitwise, which you have imagined this from U.S. presidential candidate a year ago, we're entering the mainstream era. I mean, I think that's just incredible that something like that could be tweeted from a presidential candidate. We would have imagined it from Donald Trump before four years ago because he was screaming

about how he was no fan of Bitcoin. So, you know, if we're being honest, he was never screaming about that. He was letting Steve Mnuchin. Mnuchin was tweeting. Mnuchin stole his phone in the morning and fired off some tweets about his hatred for Bitcoin. But still, this really does show you how much things have changed in the past years when we had such bearish sentiment and such fears about the United States government to some degree on both sides. And here we are right where the cycle should be back into 70,000's waiting. to break an all-time high with the election. I mean, you know, the title here, here is why next week

will be pivotal for crypto. Well, that shows you, right? I mean, it's going to matter who's the president for the next four years. It absolutely will. And, you know, I think that there's sort of an interesting nuance to the political conversation where it matters both, I think, as much as people feel, but also sort of not as much in the sense that it will be highly consequential. We've seen with this administration how much a White House's disposition towards the asset, whether it's direct or whether it's by verge of allowing someone else to control their disposition towards it can impact policy. At the same time, I think that post-election, we will sort of, you know, remember that it's going to be fine in either case. It's just how

fine it is and how much we have to deal with along the way. I agree with that. Well, there's one person that we're definitely not surprised is very bullish on Bitcoin right now, but maybe we can finally be surprised at just how bullish he is. Michael Staler. Micro Strategies, 21 billion equity plan tops Tesla for record. So that is absolutely nuts. And then when you consider that 21 is actually 42, and we have a story here, micro strategy, sailor pitches, volatile share price is a sign of healthy capital. But this guy has always been all in. We've still been surprised at just how all it is every single time. He raises a little more debt to buy a little more Bitcoin. 42 billion more dollars in three years.

Can he pull this off? I am not in the business of betting against Taylor when it comes to his for acquisition. You know, look, at some point, the eyes get so large that even the free marketers go, like, do we really want him buying all that much? But for now, you know, I think that if you're, if you're really looking at it, you're looking at price support for as far as the eye can see at the stage. So, you know, it's super ambitious.

I think, you know, he is abundantly clear about it is. What was really interesting about this earnings call where they were discussing the strategy is Sailor threw down the gauntlet. It was very clear that it was no longer a sort of justifying how they think about things. It was about a sort of denial that anyone could catch up to them without going all in, right? He basically said at one point during the call, other people are going to get interested in this. There's no way they can actually copy us without calling all in. And no one can go as all in as we can go right now because of, you know,

We didn't start here. We had to sort of grow this. And it was very interesting just how different the conversation was. In fact, more broadly, one of the things that I noticed doing shows this week is I had a full-ass show about earnings calls related to crypto. There was Robin Hood, Coinbase, Micro Strategy, and a couple of others. And obviously, we kind of know all these things in the app track. But the fact that there was a full show's worth of news about earnings calls from the public markets that relate specifically to crypto is sort of just a reminder. of just how different things are.

Well, Robin Hood did poorly, as you mentioned them. And I think it's interesting to talk about Coinbase very briefly here, but their shares tumbled the most since 2022 after results lagged. Estimates, they had total revenue of $1.21 billion. Of course, that's very good. But it's how you do versus expectations and expectations of $1.25. And their net income was $75 million, which was below the $112.2 million expected. But important note, I think that during this period last year, they lost $2 million.

Right. So Coinbase is healthy, doing exceptionally well. But looking at these two, which pre-ETF were sort of the biggest proxies for the crypto market or Bitcoin in general, micro-strategy is wildly outperforming Coinbase now and the other. Yeah. I mean, so the thing that's different is that micro strategy, all you have to be, your calculus is entirely around what you think Bitcoin's going to do to some extent, right? Plus what micro strategy is signaling. I think the other thing that's interesting about micro strategy telegraphing this strategy in a way that they perhaps haven't before in terms of getting specific is that it gives analysts a chance to kind of actually start to put models around how they think micro strategy is going to behave relative to the price of Bitcoin, right? It gives it a chance to kind of catch up to the premium of micro strategy stock versus the

underlying Bitcoin. Whereas with Coinbase, you know, Coinbase has always been a tale of two revenue streams. One is trading and the other is everything else. And so Coinbase's trading revenue was down over the last quarter because it was just quiet, right? We all felt it. You know, we had to make up a bunch of stuff like luckily, you know, Trump and Kamala were here for us making sure that we had something to talk about every week this summer.

But it was quiet, right? It is even this year, I think, has felt disproportionately quiet even relative to price. And so, you know, the Coinbase has for years now been really clear that everything in that company, the long term, is about diversifying those revenue streams. Like, that's what they focus on. It's base, it's custody. It's all of these things. And, you know, they're showing, if you kind of take a step out from quarterly results,

they're absolutely showing progress on those things. But, you know, trading is still king. It's still driving, you know, a big portion of the revenue. So, you know, I think that your assessment is right that this is still an extremely sort of healthy performance just didn't quite get at expectations. But I think expectations were, I don't know, one of the things that just, it's interesting about expectations is I think crypto companies are in for, we're still in a period where Wall Street analysts aren't that good at understanding what's going on in markets. And so it makes it hard for them to, you know, kind of get expectations right when I'm. it comes to trading because they're not sort of familiar with those dynamics. And my guess is that that will get better over time.

Yeah, they throw a dart to get an expectation and the stock moves based on how the actual numbers and come in relative to those expectations. Wall Street doesn't understand how to value base, right? They don't understand that if we get a raging alt-coin bull market in the next three months, that Coinbase's revenues are going to absolutely skyrocket. but hey, I see that as an opportunity more than certainly for Coinbase. This episode of The Breakdown is brought to you by X-SAT Network.

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is because we had TetherFud. And if you get TetherFud, it's always some sort of bottom or precede some sort of major Bitcoin move to the upside. We have this story here that Crypto's too big to fail. Token Tether faces new threat from U.S. and tether usage shifting largely out of the United States as U.S. scrutiny of 120 billion stable coin grows. First of all, this thing is 120 billion. I don't know where it was this time last year, but it wasn't close to that. Tether, absolutely one of the most profitable, incredibly growing fast companies in the world.

And seemingly, even this fud is dated and kind of nonsensical. and the DOJ is sort of always looking at Tether, right? Yeah. It just seems like there was nothing new here. Yeah. I mean, listen, so one, I think you're right, like, at this size and at every size that it hits from now on, scrutiny, there will always be scrutiny on Tether. It is simply too big to not be constantly scrutinized, right?

Every office and every potential, you know, regulator and enforcement division is going to be constantly looking at this company. You know, it's just massive. And it's so getting to be, you know, more and more system. so that's sort of inevitable. What's interesting about this story is, is sort of the question of there's a few different scenarios that this could be. One is, it's, you know, there is a pipeline between the DOJ and, you know, sort of major news outlets that we've seen before that use press leaks effectively as tactics to try to kind of exert pressure. I think the place that we

saw this most, and this kind of resembled to me, was in the months, leading up to Binance's settlement. We saw a lot of these types of leaks, leaks from privileged sources in the enforcement divisions, you know, well-sourced that, you know, sort of felt like they existed to put pressure on the, you know, the company in question to maybe come to the settlement table. Now, we've got tons of those with Binance. I mean, there was a series of like four or five of them that happened. So, you know, this is not that same pattern. It's just a single story. But it is reminiscent of that to me. At the same time, this story could be a single person inside the DOJ who has an axe to grind who wants to throw, you know, Tomahawk on their way out the office.

Like, there's a lot of reasons to also not take it all that seriously. I think that the tinfoil hat, not that tinfoily, not that haty kind of look at this is Howard Lutnik has been getting larger and larger in the media, you know, is Trump's transition team coach there. And, you know, he's a huge tether bowl because, because his company, yeah, custodying it. And, you know, maybe there's some lawfare, you know, or, you know, the sort of pre-lawfare politic and going on. Who knows? I think ultimately, we should assume that with where tether sits, and I have to assume that tether knows this, and they've given all the indications that they are operating as such, they are now officially sort of too big to operate kind of fully outside the system. You know,

They're clearly still focused on providing services for, you know, outside the U.S. and the global South. But they've also spent the last three years not seeding the official U.S. stable coin story to U.S.D.C. There could have been a moment where in 2021, 2022, Tether kind of just said, like, you know what, you get the U.S. will take everything else. But they haven't. They talk all the time about how much they work with the FBI. And, you know, like, so I would assume that whatever amount of scrutiny there is, Tether is taking

it head on and using their considerable war chest to make sure that they are. out ahead of it. Yeah, and this is one of the guys they fear, Gary Gensler, interesting here that he's gone mainstream, right? I love the beginning of this article, and you can unpack it a bit for us. It's my personal belief that no normal person should know the name of the securities and exchange commissions chair, and yet here I am about to explain why he's been an issue in the 2024 presidential election. Good job, Gary. What do you think? Yeah. This is an interesting article in the sense that journalists, not pro-Crypto Bull, not necessarily even, she, you know,

kind of provided some amount of logic, you know, not like sort of that you're supposed to believe, but, you know, at least an explanation for why the SEC would use its sort of regulation by enforcement strategy. Basically, the argument of the piece is that regulation by enforcement is what's available to them because judges keep letting them do it. So that's, you know, they're incentivized to kind of take that path. She kind of lays the blame at the feet of Congress for not giving the SEC more resources. But at the same time, it's pretty clear that there's not a lot of compassion for the idea that the SEC says come in and register and then doesn't allow people to come in and, you know, and work with them. So I think, you know, if you were a totally objective

outsider just reading this, probably what you'd come away with is thinking, boy, all that looks messy. There's clearly not a hero on the Gensler side. Maybe I understand where they're coming from, But I don't think it's a particularly positive look for Gensler or this SEC in their approach. This guy's got to go no matter what happens. And the reason that he's got to go for this administration is that we have a few surveys here that you're saying that crypto really matters. This is from paradigm. Crypto will matter at the ballot box this November, which of course is now. And then we had one from the digital chamber.

I spoke with Perry and Boring actually yesterday about this. Another major polling piece that basically said that 16% of votes. voters care deeply about crypto and would consider voting for a candidate based almost solely on their belief about crypto. It actually went into a lot of other interesting findings, especially that the people who were voting Democrat and believed in crypto largely thought that the Democrats were more pro-crypto, and those voting Republicans thought that the Republicans were more pro-crypto. So it's important sometimes to step out of our echo chamber and realize that things are very

bipartisan and most people are just going to assume that their team is better for their thing. Yeah. I mean, there's something nice about that, honestly. You know, like, it's people have this sort of faith and confidence. But I don't know, man, it's, it's still hard for me to wrap my head around these statistics. I think a lot of them are, you know, what is clear from the aggregate of all of these polls is that this is a meaningful issue to a meaningful portion of people. Where they tend to lose me is when they try to construct questions that are about single issueness. You know, it's very hard for me to believe that actually five percent of Americans are single. single-issue crypto voters. There's very few issues that have 5% of Americans as single-issue voters

around that thing. But it almost like doesn't matter, you know, because that's so incidental to the fact that, like, there is no way to read these polls and what has happened in this election cycle and not see crypto having emerged fully as a meaningful political force, an issue that speaks specifically to a lot of people as well as being resonant with a lot of other related issues. Crypto is here on the ballot box, on the agenda, whether people are voting exclusively on their crypto beliefs or just as a part of a thing, it's not ignorable in any meaningful way. And more than any polling, the candidate posture has demonstrated that. Yeah, so that wraps the major stories we were going to talk about.

It was such a big week that we had a lot of honorable mentions. We had a new fake Satoshi, which was supposed to be announced at press release in London. We had, obviously, the Treasure was advising on tokenization, basically said that. stable coins helped the U.S. dollar, which was interesting, but then completely left crypto out of their financial inclusion report. We had Emory University buying Bitcoin ETFs, Hong Kong, prepared for crypto markets, cracking restructuring and firing people, consensus laying off people, DYDX. When I tell you guys, it was another big week. There was a lot there. Yeah. This is our last Friday five before the election. Next week, we're going to be able to

actually kind of like sift through, well, presuming that we know who the new president is at that time, which is, you know, anyone's bet, we're going to have a lot to sift through. But, you know, I think where we kind of just ended is a pretty good reflection of, you know, what the last three to six months have taught us in terms of the crypto story. You know, here we are in an election cycle where crypto has absolutely and undeniably become a major issue, where we had a candidate from one of the major parties, you know, lauding bitcoins in the Satoshi White Paper, you know, Bitcoin White Paper Day, yes. yesterday on Halloween, where crypto political forces have meaningfully swayed primary elections

up and down the ballot, and where Bitcoin is sitting at, you know, above 70,000 for the longest period that it has, as it's seeing record inflows for an ETF that's largely driven by institutional buyers. If you need a picture of where things are right now and how different it is, you know, it's a pretty good snapshot. Absolutely agree. I'm not sure if I'm looking forward to or dreading next Friday, but I guess we'll see how the next seven days of our lives go. It's important to remember, guys, that if the person that you support loses, the world's going to be over next Friday. So half of, I don't know if I'll all even be here. Yeah, well, it's crypto. So we'll see about like, I don't know, like somewhere between 30 and 70

percent of you, I guess. Yeah, that's exactly right. All right, guys, that's all we got. Nathaniel unpacked a lot of this on the breakdown, obviously, this week. So if you want more in depth, go back and listen to those and listen to them into the future to get a preview of what you might hear on the next Friday five. Go ahead. Give him a follow. and always listen, man. Thank you so much. See you next week. There, guys.