The Breakdown - The Friday Five

Episode Date: October 19, 2024

NLW and Scott Melker count down the top five stories in crypto this week. 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, Cefu, Cubolt, Matrixport, Copper, 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, October 18th, 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, back with another Friday 5. here today. We've got some Uptober analysis, some political analysis, all the things that you

have come to expect from this season in crypto life. So without any further ado, let's dive in. We had a lot of mystery as to when October would start. And of course, right at the back half of the month, here we go, Bitcoin up 10%. We're so back. It turns out when you dig into it, it tends to be. I think that I saw someone studied it. It was like the 14th was the average day that it kicked off or something. So we're actually quite in line so far, it seems. Yeah, I mean, take you a look quickly, up 10.61%. I mean, very, very conspicuously, all coins underperforming here. You take a look at Bitcoin's up to add. You doge down there up 23% and we can talk about that a bit. I mean, it obviously has jumped because must is out

on the campaign trail talking about the Department of Government Efficiency, aka Doge. I'm old enough to remember when if he did something like that, Doge would go up like 300%. Yeah. I mean, listen, he is, there has been a steady, you could chart how Elon's mentions of Doge, the power of the mentions decrease. However, it still works now like 34 times deep. So, you know, some trades are always going to be there. Yeah, I mean, sort of before we really get into the news, you know, we have this title, Crypto's Most Bullish Week. There are reasons to say that. I mean, BlackRock, spot Bitcoin, ETF, draw. and over a billion so far this week.

I know we sort of unpack these inflows and outflows, but this was particularly eye-opening how much money actually came into these ETFs this week. And the timing of it once again being, as you said, sort of October 14th, it's all happening in line. As you mentioned, and it's hard to deny when you're seeing a billion into one of these and multi-billions into them across the board.

So when it comes up Bitcoin dominance, there's sort of a broader question, I think, that we've had ever since, the beginning of the summer, which is, where the hell are we in the cycle, right? Like, you know, are we still watching similar patterns to previous cycles play out? Have the ETFs totally disrupted them? Have they minorly disrupted them? You know, this is sort of a big question, like how much predictive power to sort of pass cycle

stuff have currently. And I think in that lens, the fact that Bitcoin is outperforming should actually be good news for us. The rotation into all sort of happens when the cycle is on its, you know, it's, you know, you know, sort of moving into its culmination phases or not culmination, but you get what I'm saying. Like, it's sort of, you know, not on the upswing anymore. And, you know, I think that what we would hope is that we have not yet hit the peaks of what this cycle, that we got there a little fast because of the ETF excitement, because it unlocked a new set of capital, but that ideally

we'd be sort of still looking for that gradual move up into new Bitcoin all-time highs that are potentially more meaningful than just, you know, a little bit higher than previous. and all the sort of stuff that comes after. So, you know, listen, I think if you took away the ETF-related all-time highs, we start to look a little bit more like we might have, you know, in any other year. Yeah, absolutely. And listen, you can't talk about crypto in October of 2024 without talking about politics, right? I literally just pulled up this cute election countdown clock,

but we got 17 days, 15 hours, and roughly 49 minutes. until the election. And this has really been, I think, to some degree, in many people's minds, what's driving price action at this point. Of course, we have Donald Trump at 61-ish percent on Polly Market. I think Kalshi was about 55-56, which is less crypto-native, obviously.

But it's not the only race worth discussing at this point. We obviously had the two debates between John Deaton and Elizabeth Warren, and man, they were explosive. I know that you saw some of the clips. I watched the entire first debate and was trying to get through most of the second debate this morning, but it's really on the docket in that race. Yeah. I mean, you know, it's a referendum.

And I think it's always been an enormous long shot, right? Elizabeth Warren is an incredibly popular politician. She's still polling, you know, double digits ahead. But the, there are clear strides being made. And, you know, holding aside even how many unbelievable shots, Dieton got in across these debates, you are seeing a shift. She's being forced to shift in her stance. You hear caveats every time she talks about crypto now, that it's totally fine with her if people want to buy and sell crypto, which has never been part of the anti-crypto army didn't

start off saying it's totally fine if people want to buy and sell crypto, but we're building an army, you know, if you happen to want to launder money. Anti-Crypto army was the anti-crypto army. So I think that there is clearly manifest a shift. And I think it's not just that race. I think it's also, you know, broader sort of, you know, headwinds for the anti-crypto army. But Deaton is bringing it to her in a way that localizes the issue as well that doesn't allow her to just be, she can't afford to completely ignore it in the way that she might have if he hadn't gotten into this race. Agree.

And so in the first debate, obviously she was on her heels about. crypto, as you said. Everybody can buy and sell it. It's totally fine. I just want the same rules of the road. This is the same woman who sat on the Senate floor with Jamie Diamond, like, ecstatically saying that crypto should be entirely banned in the United States. Right. So we, to your point, we know the narrative. I just want to play. I found two very quick clips from last night. She obviously came prepared two days later with a new gotcha phrase, which is the 80, 90, 100. I don't know if you heard this one, but she mentioned it multiple times. But here's one clip. Hopefully I can hear it. out more profits. He wants to talk about corruption. Let's use the 80, 90, 100 rule. 80% of Mr. Deaton's

wealth is tied up in crypto. 90% of his funding for this campaign is coming from crypto. Senator, that's time. And 100% of his loyalty in Washington. Mr. Deaton, you have 30 seconds to respond. That is corrupt. Senator, I mean, so this is her new thing. 80% of his money is coming from crypto, 90% or 80% of money is in crypto, 90% of his donations are coming from crypto, and 100% of his interest will be for crypto. And she says it again back here. Let me find it here. Hopefully this will play correctly. Great. Come on. Well, you get the idea. And she goes in a hard defense of Gary Gensler in this

later part as well, which I guess is not surprising considering he's her plant, but basically saying that Deden only cares about the SEC because it's about crypto and because that's where his money comes from and that's his sole interest. The fact that she's in as strong and incumbent position that she is, that she's got to frantically race between debates to come up with new soundbites tells you a lot about the state of affairs. It does. And I mean, still, the reality I think of the election is that he's pretty far behind, right?

As much as we love to focus on these debates, you've got to imagine that your average Senate debate doesn't draw that much attention. So we're in a situation where he just needs a ton of money to get a ton of exposure so that people even know his name. I mean, right now this has her at 56, him at 34. I've seen polls where they're within 10 or 11 percent, depending on what it is. This is theoretically doable in three weeks if he has some sort of viral hit, but it seems like we know that the most entrenched senators in the world rarely lose, right? Yeah, of course. I don't, you know, look, you never get into an election with 100 percent conviction that you're going to lose. You just couldn't fight it that

way. But I also think that he clearly got into this election for more than just the very outside chance that he would win. He got in to take these issues to her to plant them on her front door, make her answer those questions in front of her constituents. And he asked, listen, if he has a 1% chance of winning, great. I'm willing to support that. I just wanted to hear them on the debate stage and make her answer the questions. And she did. So I found it personally gratifying and entertaining, but it doesn't mean that I think he's necessarily going to be able to pull this off in a few weeks. Moving on to somebody who's been aggressively campaigning. We've got Elon Musk here, and he's obviously been on the campaign trail in Pennsylvania,

which I think has had a meaningful impact. But the story I want to talk about is that they moved a whole lot of Bitcoin. There's $760 million of their Bitcoin. Went from the wallet, everybody knows, to a bunch of wallets nobody knows, obviously leading to wild conjecture as to what could be happening there. My gut never said that means they're selling it, right? It's not like it went to a transparent exchange account, and there are a lot of reasons that you would move it around. But what do you make of this big transfer here? A couple things. One, I agree. I don't think that it's a logical conclusion to jump to that this would a priori suggest that they're about to sell it. I think that there are a lot of reasons given Elon's support of Trump that it would be

sort of insane to sell a huge grip of Bitcoin right, you know, before the election as you're trying to like win that constituency as part of it, you know. I think that the complete and utter disinterest in the Bitcoin price to that possibility is reflective of how times have changed, right? In 2021, we were living on what Elon and Tesla did or didn't do, right? Like the announcement that he was going to buy and put Bitcoin on the Tesla balance sheet, sent us to new all-time highs. And then like 15 minutes later when he decided that he realized that there was an

environmental issue, so Tesla wasn't going to accept Bitcoin. I mean, that through that, that was the thing that stopped that last full cycle. Yeah. I mean, fully. So I think that we got used to Elon as a fickle friend, among other things. But look, Bitcoin didn't bat an eye. And I think that especially in the context of the inflows that we've seen from ETS this week, you know, the ability for Bitcoin to handle $760 million in sales, even if that were to happen,

I think it's just so different now than it was back then. Yeah, and he's obviously outstumping for Trump right now. As we said, it's made a pretty big difference. This episode of The Breakdown is brought to you by XAT Network. As regular listeners know, one of the things that I think is really exciting right now is all of the new builder energy around Bitcoin, and XAT Network is a great example of that. XAT Network utilizes a combined consensus mechanism of POW and POS, enabling miners to earn revenue and stakers to earn Bitcoin yield.

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Meanwhile, on the other side, our next story is that Trump is still launching coins over here. And I shouldn't say that negatively. Trump is launching his own D-Fi project, which is a fork of a. Trump-linked World Liberty Financial to raise $300 million at 1.5 valuation. That's kind of how it started.

It hasn't gone that well. So they've raised a fraction of what they were looking for as we looked through this. And there's a lot of rational reasons that might be the case. But let's just say, to be fair, it was not smooth. the website continued to crash.

People couldn't get in. There wasn't as much interest. And a lot of people scratching their head as to why this is happening within 21 days of the election. Yeah. I mean, that is a whole separate question in some ways that it just kind of is mind-boggling still. I think, look, I'll go with the weird take that it suggests to me that the

But crypto audience is much more rational and adult than they have been in the past, that they didn't buy 300 million of this thing at a $1.5 billion valuation right out of the gate. So much of this sort of felt like old dynamics and old strategies. And it doesn't bother me that it wasn't rewarded by the market. Let's put it that way. Yeah, I mean, there's a lot of articles here on why it might have happened. I mean, if we're going to be at least slightly fair, they apparently tried to do this. in a compliant manner, which we know is effectively impossible in crypto, but only for accredited

investors, right? So really tedious to be able to actually buy this. So your average crypto Digen, who would have bet money on a Trump NFT couldn't get a miss. Right? And outside the U.S. probably even more complex. So they set it up in a way where the tokens are vesting for a year based on securities laws. And I think it just made this to the crypto native audience not that interesting. Yeah. I mean, listen, the entire, I think a huge portion of the demand for ICOs when they happened back in 2017 was the fact that people, because of accreditation laws, have been structurally denied access to early technology-related risk, and they had that appetite. I mean, a big part of crypto demand in general is for that. So, you know, you cut out that whole piece of the buying

audience and, you know, it's going to impact things. Yeah, that's interesting. article, five reasons why Trump's World Liberty Financial token crashed and burned. First of all, I think it's a little early to call it a crash and burn. I think it's fair to say that the launch didn't go that well, right? Because of a lot of history ahead of us. So I don't think that's fair. But there were limits on who could purchase Trump's token. We talked about that. It's not transferable or tradable. The website crash. People think it's a grift. And the buying process is tedious. I still think that this actually, whether you want to believe it or not, probably has a fighting chance.

It just wasn't that great of an early sale here. Yeah. It exists now, and it's going to continue to exist. So we'll see how it evolves from here. Absolutely. So the next one then, obviously, we have to go into his opponent, Vice President Kamala Harris, and her positions on crypto, which lit the world on fire this week, obviously, because she said she was going to support a comprehensive framework.

regulatory framework for crypto, but then specifically tied it to the future of black men. So Kamala Harris will deliver for black men, crypto being a part of that. Kamala Harris has released a policy for black men in America. It consists of protecting crypto investments, of course, right next to legalizing recreational marijuana. And crypto gets a color. It's black. I mean, is this a fair criticism the way that this is being skinned by the media?

Sort of. So look, it's unbelievably weird and ham-fisted the way that this was approached. Let's talk about what I think they were going for. And obviously, I have no insight into the campaign. There is an acknowledgement implicit here that black audiences, black male audiences in particular, are buying crypto at a higher rate than others, right? This is not just black audiences. It's other minority groups in America as well. And the cynical take that many progressives have taken is that this is predatory inclusion, right? That's a phrase that you'll hear, that it's sort of a way of playing on people's fears, and it's not actually giving them access to any sort of better financial system.

It's just a predatory approach. This is, and this is the most positive take on that, I think, in some ways, potentially a sort of an acknowledgement that there are legitimate reasons. or this is the way that she could have taken this. She could have said, this is an important thing to an important constituency. Like, I'm four important things for an important constituency. What was weird about it is, one, the fact that it's the most sort of specific that she's talked about crypto and she did pin it to one specific group, right? If this had come on the heels of a larger sort of broader embrace of crypto and digital

assets as an inclusionary technology, and then she sort of leaned in. into the specific group as the example, that's very different than just talking about it in the context of one group. So again, I'm less ready to jump down her throat as like thinking it's just for this group, you know, and saying it's not for anyone else. I think that analysis is a little politically motivated, frankly.

But it's also very where she did it. And I think that the bigger issue for people who are in crypto, even if you don't want to take her to task for that stuff, is that it's got the very Genslerian language of protection. And in fact, what they say they're going to do, do is incredibly weird. They say they're going to guarantee the protection of people's crypto. You know, like it's not about making sure they have access to it or that it's safe. It's like it's basically like we're going to protect you from your own crypto investments is kind of

the vibe. And so that's the part that rubbed me the most wrong is very patronizing, as literally written. Danzlarian. I like that. It also didn't work for what it's worth. No one was stoked on this. The whole crypto sector was sort of, you know, pick your reason to find it just weird, even if not, like, you know, outright offensive. And then the progressives just freak the hell out about it too, right? I mean, they, like, I could pull up quotes from these groups who are basically just like, they think that Kamala is in the pocket of crypto because of this. And they use language like that. I mean, literally, if you go look at progressive Twitter. Yeah, it's unbelievable. So very ineffective, if nothing else.

Yeah, it's like you have what we heard from Elizabeth Warren. Like hyper-progressives are saying, if you're even speaking favorably of it, and especially in this manner, then you must be in the pocket of crypto and they're giving you money. And this billionaire Chris Larson from XRP gave you money. So that's why you're saying this. And everyone else is like, you completely don't get it and you're pandering to race. And it makes no sense. She lost everyone here.

And to be fair, like, if you're, we know that politicians, when speaking, you're, speaking to a certain audience pander to that audience, right? She's there for a very specific reason, and that's to gain votes from those people. But she should have just said, hey, we're going to get a clear. No, but that's what I'm saying. I fail, such a failed pandering that everybody's critical of is just, let me say, colorblind, although I guess is the wrong term.

It's just. Yeah. I think, look, I also think that this is very exemplary of the challenge that Democrats have woven themselves into over the last couple of years. is that by making this such a caustic issue and sort of embracing the Warren anti-crypto army approach, it makes it nearly impossible for them to walk back because it just means that they're gonna get this angry part

of their own party that they have to deal with all the time. You know, like you can't spend three years convincing people or trying to convince members of your own party and rally your base by saying that this thing is just the next coming of the evil financial set and then go back on it. So they're in a bind, but it's a bind of their own making. And then we have the more dystopian side of crypto as our final and fifth story, which is, of course, Sam Altman.

His eye scanning orbs can now be summoned like a pizza. So as WorldCoinExct, the project will now be simply known as World. That's a bold name, World. And plans to release Orb 2.0, the executive said during a media event. They had this big media event. They basically unveiled the Orb.2. They can just show up at your door and scan your eyeball. And they got rid of the coin part because crypto.

I don't think that this announcement changed anyone's sort of base set of how they feel about this. It's very clear for most people whether you feel like this is a unbelievably dystopian thing, an actual way to solve, on the other hand, the problem of sort of identity in the world. Or I think that the only sort of middle space that you'll sometimes see is people who get what they're going for, but still think it's unbelievably dystopian. Yeah, I mean, I don't know who wants this to be delivered to their door like a pizza, but I guess if we're going to take the other side of it, we all rail against privacy and how insane it is to have someone scan your eye

as we look into our iPhones to use Face ID and unlock all of our apps that are being tracked. So it's not like we don't get our eyes scanned every single day here. You and I are getting our eyes scanned right now, stare into this live stream. Yeah, I mean, listen, we are entering a definite new period when it comes to the compromise of identity. So who knows? A lot of things that seem absolutely insane to us now

will be totally commonplace in the future, whether we like it or not. But that also doesn't mean that you have to just go gently into the good night when something seems, you know, particularly egregious on that front. Yeah, I've just not letting them stand my eyeball. that's all they're into it. For whatever reason, I don't know if it's them or if it's the whole,

you know, chat, GBT, going from a nonprofit to him having billions of dollars part. I just question the intention specifically in this case. I've had enough up close and personal with billionaire Sam's of questionable integrity that I'm not going to give this one too easy a pass. Oh, man, he's getting the Sam, Sam Association treatment, Association by Sam. There's no better way to end this guy. That's all we got for you today. on the Friday 5. Of course, listen to the breakdown by NLW every single day. It's amazing. And follow him on X. That's all we got for you guys. Thanks, Nathaniel, man. We'll see you next week. Cheers, guys.