The Breakdown - The Five Most Important Stories of Bitcoin's $90K Week

Episode Date: November 16, 2024

Recorded live with Scott Melker on Friday Nov 16, 2024. For more of the back story of how Bitcoiner's helped meme the Department of Government Efficiency into existence: https://x.com/WayneVaughan/status/1856518975930167664 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 15th, 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, it is a big crazy week here on the Friday 5. I recorded this with Scott Melker this morning. And obviously, a huge part of the story is just the crazy market movements in crypto, what it means, what it reflects, certainly with the new incoming administration. So it's a fun one. There's a lot to talk about. Let's dig in.

There's so much to talk about. I don't even know how to break these down. Literally our topic number one, massive crypto rally, plus Michael Saylor micro strategy, plus ETFs, plus strategic Bitcoin Reserve. That's one of our five times. Yeah, exactly. At least we could sort of bunch of other things together to make them all fit. Yeah. So, you know, we start here officially with the Trump trade is still moving markets, but how long can it last? Of course, then, you know, price action, Bitcoin made it to 93. It dumped down in the 80s. It's all over. We're so back, baby. You know, the emotional, volatile roller coaster that is crypto. Trump victory tip to break logjam of exotic US crypto ETIP filings. We saw an H-Barr filing this week. I don't know if you guys saw that. Bitwise files for multi-crypto ETF after Gary Gensler

resignation hint. We didn't even add the fact that we had a Gary Gensler resignation hint. I mean, this is basically the story here is that all things Trump and future of crypto are happening very quickly, right? We're getting all the pro-crypto appointments as much as we could have imagined potentially into every key position. Most of them are Florida men, which I think is hilarious. And we're already getting companies like Bitwise and Robin Hood listing things, filing for things that they would have never even thought about a week ago. One piece of this is just sort of excitement, right? It's sort of the palpable relief after four years of antagonistic relationships. I think you see a little bit of that. I think the other

part of this is that crypto more than ever has a sense that when times are good, it's not going to waste a single second of that opportunity messing around, right? I think that this last cycle, we saw something new. We, you know, we were kind of used to these four year ups and downs, and, you know, everyone who'd weathered a storm could weather the storm. The difference of being sort of targeted in the aggressive way that the industry was, I think it really changed the tenor of how many in this space see their opportunity when times are good. And so I think part of what you're seeing is that opportunistic, literally, we're not going to waste a day,

a week, a month, a minute of this potentially friendly administration by trying to get things done. You know, we also, there's the consideration of like just how little time you actually get at the beginning of a presidential administration to actually do anything. You know, it's like before long, you're campaigning for the midterms. Midterms usually bring some sort of realignment. You know, it's just the window is actually fairly small. So you can definitely see people at least acting like now is the time to kind of, you know, strike while the iron's hot. So obviously a subset of this story is all things Bitcoin Strategic Reserve, right? So we have the idea that's been floated that we could possibly get this thing.

We've got a few stories surrounding it. Novagrat says very unlikely, but if we do get it, it goes to 500,000 silver lining of being a Democrat, obviously. And then you have Lomas pushing very hard even to sell some of the Fed's gold to buy Bitcoin. She's floating that. She's made comments that it will happen in 100 days. And then just as sort of an honorable mention, Pennsylvania House introduces Bill to

implement a strategic Bitcoin reserve. And frankly, the budgets of these states and their cash reserves are larger than all countries in the world minus 10 or something. So these are actually really, really big. This would be bigger than a major country, effectively taking Bitcoin into its reserve. We talked about this last week, too, and my feeling is still kind of the same. My sense is that Lammis is trying to define a version of this that can be compromised down to a version that still exists. If you look at the chatter in the cryptosphere, you can see they're doing their part of narrative making by pointing to, you know, machinations and rumors that other nations are trying to front run the U.S. as relates to this. You're seeing a lot of that sort

of chatter. Tons of vague and kind of cryptic tweets from people who, you know, say that they're in the know around Bitcoin purchases from big sovereigns. You know, there's chatter about some some Scandinavian countries. There's chatter about the Middle East as always. I think we'll have to wait and see. The real question is how much political will would this take and how where does it rank relative to all the other, you know, priorities? My sense is it ranks fairly low relative to all the other priorities. So it's got to be something that doesn't take a ton of political will. I don't know yet because I'm not in Washington, and I think this would be an interesting question for people who are more in the crypto lobby. I don't know what the real resistance would be to just keeping the Bitcoin

that's been seized, that sort of version of a strategic Bitcoin reserve, is that it's the idea of, you know, formally saying that there's a reserve is so unpalatable that there would be, you know, a big fight. I'm not sure. But, you know, that's the question is just, it's, it has, it's going to have nothing to do with basically the interest of the administration in Bitcoin. It's, going to have to do with where it ranks relative to everything else and whether it's worth the political cost. Yeah, political will, you could even sort of reframe as political capital or bargaining chips, right? Like how much of the favor, how many favors do you want to call in, how much of the capital, how many things do you want to trade for this? Yeah. But you've got a long four years

ahead of you. Yeah, I am skeptical from where I'm sitting, but, you know, hopeful as well. The fact that my skepticism comes from not a lack of interest from elected officials, but sheer sort of reality of how the sausage gets made and how many other things are on the agenda right now is telling of how far we've come. Yeah, I wouldn't be surprised if there's some small mention of it and it's just holding the Silk Road Bitcoin and it goes into some much larger bill as one of the sort of sub-sectors. Yep. I also wouldn't be surprised if what gets negotiated away is.

is the naming of it as a strategic Bitcoin reserve. But functionally, it's the same thing that they just hold on to it. Because it seems to me like there's two potential fault lines. One is anything around actually sort of purchasing, you know, new Bitcoin is one. But then the second is the validation that comes with naming. And that might be also on the compromising buck. Well, there's a man who has a personal strategic Bitcoin reserve. And it's obviously this guy, which is sort of the final part of this story, I guess.

Micro Strategy buys another 27,200 Bitcoin for $2 billion. Bitcoin profits sit at $11 billion. He's basically doubled up now on his Bitcoin investment. But he's also now out on the road show saying, remember that $42 billion? I said I was going to raise split into half 21, 21, not coincidentally. That might happen a lot faster than the two, three years that we saw because there's a hell of a lot of interest. I mean, he can literally raise $42 billion in the coming months and it wouldn't even surprise me. Yeah.

I mean, you know, I think one of the things that micro strategy does for everyone is there's always a as the price goes up, to feel like you miss the window, right? And usually it takes a while before you realize that you didn't miss the window. You know, you feel like Bitcoin was expensive at 18,000 back in October of 2016. And obviously look at where we are now. Sort of a long enough time horizon thing. Sailor out here buying Bitcoin for $75,000 last Thursday and looking like a genius because it's $20,000 higher three days later. So do as Sailor does is a pretty good investment strategy when it comes to Bitcoin. Now, sort of the second part of this Trump trade or what's happening with the administration

that could be pro-Crypto, obviously, is his appointments and none bigger than, of course, this dog. Dogecoin, crazed grips, Korea, fuels price premium on local giants, up it and bitthum. Yeah, but that's because we have the Department of Government Efficiency, which I think many expect it would be led by Musk. I think it was a nice bonus that it was also Vivekramus. who loves crypto and people around the administration think he's very responsible for the orange pilling, but also very critical, obviously, of regulation and the way that the government

operates. I don't know how much they can cut waste. I don't know how much it'll matter in the face of ballooning debt, but they literally called it Doge in a presidential memo, and the simulation is just firing on all cylinders right now. Yeah. I wanted to make sure something that I was informed of by a budget. bunch of listeners is that some of the earliest use of that name actually came from Bitcoiners.

So they may also be responsible for the name as well. This story is really interesting because on the one hand, the Democratic narrative around this, if you watch MSNBC or whatever, CNN, is every Republican administration forever has always wanted to cut waste. That's always been a campaign promise. It never happens. Why didn't Trump do it in the first time? Blah, blah, blah, blah, blah.

right? Sort of, you know, and hold aside the partisanship. There's a reasonable question, right? Certainly it is the case that the U.S. government has proceeded towards, you know, more debt, more bloated budgets, you know, not fiscal restraint. And so, you know, there's a reasonable skepticism, let's say, of this type of effort. The other reasonable skepticism is that this is an advisory body, right? This is ultimately, it appears a thing that sort of sits outside the administration and lobs advice in. Now, of course, it's totally within the administration's purview of how it's going to listen to that advice. If Trump, you know, tells the Office of the Management and Budget to do whatever they say, then they're going to do whatever he says. But, again, another point of skepticism.

What I think that the counterpoint for me is the fact that one, it's just in general very unwise to bet against Elon. This is sort of a standard maxim. I think that, you know, Silicon Valley has grok for some time now. and I think the rest of the world is starting to come to it. I mean, the guy decided to go all in on Trump, and he just planted up in Pennsylvania, and, you know, that was the strategy. And, you know, look how it worked.

The other piece, though, that I think is particularly telling, maybe even more than the Elon piece, is Vivek had the opportunity to basically be sort of appointed to the Senate in Ohio and decided to do this instead. And this is a man who is extraordinarily politically ambitious. I mean, he actually ran, he gave a no-bullsh-run for president, you know, as part of the, the early nomination season. And so the fact that he thinks that he's going to have a bigger,

you know, mallet to wield from this thing, even though this thing is sort of undefined, as opposed to working from, you know, within the Senate, is pretty interesting to me. So I don't know. Look, I think it's as everything with Elon is a Rorschach test, usually of how you feel about Elon. But for people who don't get fully sucked into that, this is maybe the one thing in this administration where even I see some Dems and progresses being like, you know what, if they can actually do something interesting there, God bless. Let's see what happens. I never thought about the fact that this is almost like Vivek taking a pay cut to do the

right thing as opposed to take the biggest political position that he possibly could. He could have certainly angled for a huge big name position in the cabinet and senator, obviously. So it seemed that this is literally just what he wants to do. Yeah, I mean, that's my, I think of all the reasons to be less skeptical of this. That's the one that sort of stands out to me. What do you think that these other appointments likely mean for crypto, right? We have Lutnik being floated for Department of Treasury, Treasury Secretary. I mean, imagine it being him instead of Janet Yellen, the guy who's out there saying that he loves Tether.

I think the Treasury Secretary at this point, we win no matter what. It's either Lutnik or another investor who has been extremely vocal about his excitement about Trump's sort of shift into Bitcoin and crypto and been articulate about how it's brought new investors who have been. and soured on the market post-GFC in. So Wall Street seems to have more of a feeling about that or not. You know, I think that they're a little bit less bullish on Lutnik compared to the alternatives, at least as of now. But I think that they're going to be happy with either of them relative to what's, you know, in power at the moment. And I mean, we're going to end up with obviously a pro-crypto SEC chairman. I think that's a 99% chance. I haven't seen anyone floated who would not be deemed as such. Soon, the new future Senate majority leader has spoken pro-procry

and believes that the CFTC should be getting more jurisdiction than the SEC over the asset class, RFK Health and Human Services. There's not a single person I can find here who's being floated for any appointment that hasn't outwardly said their pro-Bitcoin or crypto. Yeah, I mean, listen, to some extent, the next question is how much the anti-crypto army chooses to use that to define their opposition to the Trump administration? Do they define how they're different, you know, is crypto an access issue or do they focus on other things. My guess is, once again, when they're not in power, crypto is a much less useful thing

to be against. So I would anticipate, in addition to seeing just sort of more pro-leadership in these positions of power, I would expect that the opposition to care less about crypto because they have bigger fish to fry when it comes to their opposition. But yeah, I mean, Elizabeth Warren is now going to be effectively the ranking Democrat on the banking committee, which has people in hysterics. But I don't think it matters when you're the minority leader and nobody's got your back. So I would doubt there's an existence of an anti-crypto army at this point. Yeah. If it is, it's an anti-crypto army of one. It's in Elizabeth Warren's kitchen table, her looking at her old campaign materials and, you know, thinking fondly of what was.

Did you see that video she made about the election, you know, where she was basically sitting at her kitchen table or somewhere in her house and she was like, you know, the world's not ending. I know you're all living in fear like me. I mean, just the like, the extreme emotion and hyperbole and the world is ending sentiment that came from her. I'm still a big fan of the pendulum swings. The world never ends. Nobody actually leaves the country when their guy loses. It's all exaggeration, but man. So I didn't see that. I will say that I've been sort of pleasantly surprised at how there is, I think, and we're diverging a little bit into more politics than we normally do, but it's sort of, you know, the wrap up of this period. There's been, I think,

the expected like blame it on external factors sort of thing from the Democrats and progressives. However, I've seen more introspection than I would have assumed. I think exemplary of this is AOC found that a bunch of people in her district voted for her and for Trump. And she kind of took to Instagram and TikTok really like genuinely asking like what was the thinking behind that? Like how is that the case? Because she was surprised. And I think people initially were kind of thinking that she was being snarky and she sort of reinforced that she was genuinely asking. And a ton of people responded, we think you're both outsiders and we think you both care about the working class. And that was it. They didn't give a crap about party or affiliation.

And anyways, I think that there's a, if you're an American who thinks that the country is better when they're sort of a broad, broad set of people who are thinking from first principles and common sense, the reaction to the election has been maybe a little bit better than I would have thought. And it's because it was a landslide. It's beautiful that we didn't have a very closely contested election because if you lose that bad, you can't really blame external factors. You just have to look inside and say, hey, what did we do wrong? I had met a lawman on here the other day, James Murphy. He was obviously a pivotal part of the John Deaton campaign.

And he pointed out a very similar phenomenon that a huge percentage of John Deaton voters not, we're actually the opposite. We're Harris voters. Yep. Right. You know, that just said, hey, listen, we're Democrats. you're going to vote for Harris, no matter why for president, but we've actually taken a look, and we think John Deaton is reasonable and a great candidate for the Senate. He got over 40% of the vote when he should have gotten 18.

Yep. And when you start to have those sort of, like that sort of political nuance returns, a natural thing to happen to kind of bring it back to our corner of the world is to look at, you know, you start to survey all these issues that are clearly not that partisan and where you find yourself more affiliated with others, you find yourself disagreeing with your party, like the fact that so many Democrats own crypto, the fact that there's so many sort of progressives for crypto, that's the type of issue that instead of being a wedge actually becomes a bridge. So I don't know.

I think that there's a lot to be very excited about not only in the fact that there's basically a total sweep of crypto allies into power, but also in the fact that it potentially provides a bridge to others as they figure out what's next for their party. The next story on the docket is Polymarket CEO home is rated by the FBI when people said why apparently polymark is investigated by DOJ for allegedly letting US users bet on platform. You might remember that a lot of the reason Binance was in hot water is because they allowed Americans to use the platform with a VPN. This is similar.

But yeah, we said we're done with politics, but a lot of people pointing to politics for this saying, hey, this is the guy who had the platform that said that Donald Trump was going to win. And now a week after the election, we're coming after and before the Donald Trump era begins. I'm not sure if this is or is not political, but holy timing here for this right after the election. I'm a big fan of Occam's Razor explanations for things. And usually Occam's Razor points away from conspiracy and towards, you know, it's bureaucrats doing their job and just the timing happens to line up. I think in this case, Occam's Razor kind of points the other direction and says, you know,

someone had to be up their butt. They knew that there was no actual action here. They just seized a bunch of, they didn't arrest him. You know, they just seized a bunch of things, you know, did it a dramatic way with media coverage. So I don't know. I think that the big question is less about this. The legal issues of prediction markets are going to be fought in courts. Even when it comes to VPN, there's, you know, there's open legal questions around our, you know, what it means to block VPNs and what you have to do and what does and doesn't constitute sort of a sufficiently robust strategy as relates to that. Again, all of those things are for courts. The bigger question here, I think, for us is, are we going to see a spate of these sort of vindictive last minute

actions from this White House. My instinct is that from the White House itself, I would be surprised. I think it's a pretty sufficiently beaten and cowed institution at this point. I think Biden's just happy to be going home and getting some sleep. But I think that for, you know, there are a lot of bureaucrats who have had a lot of leash over the last four years and who have been able to sort of be silent halls of power onto themselves who still could exact some revenge. I was trying to find the tweet, but I don't have it in front of me, but absolutely hilarious response from Shane Copeland, the CEO of Polymarket, I think this is his last name.

He, Copland, and he simply tweeted, new phone, who this, after it happened, because they had taken his phone and his computer. Our industry has a great sense of humor, even in the face of a whole lot of drama. You gotta love it. Yeah, I think either my favorite tweet was, with someone basically saying, like,

the FBI are total nobs. Like, if this goes anywhere, you're going to have Trump on here talking about how awesome polymarket is in less five seconds. You're going to 10x their revenue. Yeah, this is only going to help them get more. All press is good press, as they say, right? You know, we're out of order here.

So this was kind of another political story, is that we have this rumor that I've not seen vetted as fact yet that President Trump wants to eliminate all capital gains taxes on cryptocurrencies issued by U.S. companies. Quietly, if this is true, is the biggest story ever. I mean, saying, hey, everybody who ever issued to crypto can come back to the United States, start an actual company, and we're going to have no taxes on anything that happens with it. Oh, and by the way, if you want to just form a legal

company here and launch a token, have at it, no capital gains taxes. Is there anything that would ever be more bullish for the crypto side of the crypto industry? No, I mean, look, this is the next thing to look for is whether the U.S. the regulatory sphere can actually get it together to allow these tokens to operate in the full spectrum of they do. You know, security-like things, right? Like, are they allowed to operate in this weird middle space that's not cleanly in the categories of before and figure it out? You know, I think that that's what I'm watching for. That is number one on my wish list for the industry, you know, in some ways outside of just, you know, sheer, sheer not of taxes. Just let the things be what they are and figure it out as it happens.

I mean, but the incentive for all of these Americans who have left for foreigners to come to America to incorporate and for, you know, you and I to just launch Friday 5 token with no fear of Gary Gensler, the implications of that to me are just absolutely astounding. Yeah. We'll see. This feels like one that's, I'm going to reserve my excitement until we get a little bit more. I'm going to strategic reserve my excitement. And finally, we're going to talk a little bit of macro feds.

Powell says no need to hurry rate cuts with economy strong. he sees inflation on sometimes bumpy path towards 2% target, and economy's strength allows Fed to approach decisions carefully. Markets don't love when Powell says, I might not cut anymore. And the nuance here is that CPI and PPI were actually up for the first time in a very long time, and 10-year yields are booming, even though we've cut 75 bits.

So there's some complexity here. The market conditions are so well-suited to Powell's style, of running this policy right now. And what I mean by that is that Powell is conservative in the truest sense of the word and that he doesn't want to move too fast on things. Right? He wants to be data-driven. He wants to see, like, he'd rather be a little bit behind than a little bit ahead. Now, of course, he was way behind on inflation that caused a huge part of the problems that we've been experienced. However, when it comes to the sort of the come down of that, we've been living for so long in this world where some signals are pointing this way and some signals are pointing that way. And that is a

really perfect environment for this extremely conservative, slow-moving policy that he's enacted. And we're still in that exact situation. You just pointed out, you know, the data isn't all telling one story. It's telling multiple stories. And as much as the markets would like lower rates, they're also doing fine where we are. So it's Powell. Powell's in a Goldilocks moment for Powell. Let's put it that way. And whether that stays, we'll have to see. Well, we're done. But I do have something that we need to celebrate. It's a big day, now and I just realized it. So happy $36 trillion U.S. National Debt Day to those who celebrate. We did it. We finally got over that 36 hump. It only took about 80 days, I think, to get here from

35. But we can talk about the government all we want. We can talk about the Department of Government and Efficiency. But in the words of Lindelden, nothing stops this train. Yeah. I mean, it's the world we live in. So we'll see. 36 trillion dollars. Let's see if we can get to 37 by next Friday five guys because we will be back next week. Very exciting. Maybe we'll miss the week after Thanksgiving. I don't know. We'll have to see. But next week, I will definitely be here. Guys, follow NLW, the breakdown. That was a whirlwind. You know, sometimes it's just really hard to break this down and figure it out. I'm glad that I have you because I would have been completely lost today. Yeah, this is a fun one. Listen, if the next four years are all sort of dynamism and volatility and chaos, I'm here for it.

Me too, because at least we'll have something to talk about, which was not the case a lot of times this summer. All right. Thank you, everybody. We will be back next week, follow NLW and The Breakdown, and we'll see you soon. Thanks, guys. Bye. Later, guys.