The Breakdown - The Mainstream Media Narrative Shifts as Deutsche Bank and Morgan Stanley Come to Bitcoin

Starting point is 00:00:00 CNN posted a story on Saturday titled Everything You Need to Know About Bitcoin and tweeted it out saying, if you've been ignoring Bitcoin thinking it might just be a financial fad, now's the time to start paying attention. On Sunday, the banner headline on Bloomberg was Bitcoin's epic run is winning more attention from Wall Street, Bitcoin nears $50,000 as it hits a record in weekend action. We're so used to the stories of Bitcoin Fudd and why it's boiling the oceans and everything else that to see that start to focus on this momentum that we all feel, the tectonic plates of finance shifting under our feet is a remarkable thing.

Starting point is 00:00:39 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. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Monday, February 15th. and today we are talking about even more institutional involvement in Bitcoin. First up, however, let's do the brief. First up on the brief today, a quick follow-up from a show last week. On Friday, I discussed Jay-Z and Jack Dorsey's Bitcoin Trust.

Starting point is 00:01:20 The point that I was making, or at least one of the points that I was making, about celebrity involvement during this Bitcoin cycle, was that it was coming in one of two forms, either a creative thing that made sense, i.e. non-fungible tokens for musicians and artists who are trying out a new medium, or two, it was around Bitcoin. I said this was powerful and showed how much things had evolved since the days of everyone's named coin in 2017, 2018. I also jokingly ended on enjoy it while it lasts. And that day, literally that day, all of a sudden a slew of random B, C, and D list celebrities started popping up, tagging TRX and Justin's son. It was like Neo, Jake Paul,

Starting point is 00:02:06 Lindsay Lohan, I mean, really the absolute cream of the crop. So there it is. We are officially at the point where everything I said is no longer relevant. In all actuality, I still think that this even more means that we should affirm those like Jay-Z, who aren't just taking a paycheck to shill something and are actually discussing underlying principles and what they find interesting in Bitcoin. Still, I just thought it was funny that literally the day that I was saying that maybe the cycle was different, Jake Paul saying TRX at Justin's son. Anywho, onto our next topic to big valuation financings that are showing how hot crypto is right now. First up on that list is Dapper Labs, who you may remember as the originator of CryptoKitties. They're raising $200,000.000. They're raising $200,000,000,

Starting point is 00:02:54 $150 million at a $2 billion valuation. And if you haven't heard anything about them since the days of Cryptokitties, here's the reason. They're at the epicenter of the NFT slash digital collectible space. Their collaboration with the NBA, the NBA Topshop project, is currently the most popular NFT series. It was launched in October 2020 and overall Dapper Labs has reportedly generated almost $100 million in NFT sales. The deal is purportedly being led by KOTU management, which is much better known for huge tech deals like Instacart and Spotify. Now, the second major financing that I wanted to mention is at an even bigger valuation. The Block is reporting that BlockFi is raising a $150 million Series D round at $2.85 billion

Starting point is 00:03:40 pre-money valuation. They intend on launching a credit card product and potentially going public this year. Third and finally on the brief today, let's check in on Kathy Wood, Ark, and Bitcoin. Last Monday, when Tesla announced its Bitcoin position, I tweeted out, it's Kathy Woods world and we're all just living in it. The reference here, of course, is that Kathy was one of the earliest and most convicted investors in both Tesla and Bitcoin. Obviously, both of these bets have played out extremely well. And interestingly, we just found out that the conviction around Bitcoin also doubled down last quarter. Arc Investment Management increased its holdings of the

Starting point is 00:04:23 grayscale Bitcoin trust by 2.14 million shares. On October 31st of last year, it had 5.17 million shares and now hold 7.31 million. The total value of those shares is around 357.5 million. The bet is already paying off. GBTC shares rose 222% in Q4 last year and are up 39% in 2021 as well. Meanwhile, over on Bloomberg, they're speculating that ARC is doing so well that they're they're soon going to run out of things to buy. ARC ETF saw $8 billion of inflows in January, and February has already seen $7 billion. In total, they now manage $58 billion in assets.

Starting point is 00:05:06 The issue is that ARC is thematically focused and already owns more than 10% of at least 25 companies. Some are wondering if this doesn't create two types of risk. The first is that huge inflows into ARC actually end up flooding a space like biotech and if assets start to flow out, it could undermine the entire sector. The other threat is kind of the opposite direction. Because they own such a high concentration of these companies,

Starting point is 00:05:33 if those companies start to dip, it could force the firm to sell in a big way, which starts a really dangerous feedback loop. Still, right now, more or less, everything is looking great, and you gotta assume that if anyone can handle this and figure it out, it's these guys. Many investors want to be a part of the next bull run. Others seek to be part of the next bull run.

Starting point is 00:05:54 build their dream home, finally launch that startup or fund their education. Try Nexos instant crypto credit lines and borrow against any major cryptocurrency with no minimum or maximum withdrawal amounts, no fees whatsoever, no credit checks, and flexible repayment. Not to mention the APR starts at just 5.9%. Stay on top of your investment game with nexo.io. And remember, it's your crypto, your credit, your choice. Get started at nexo.io. Let's move over to our main discussion. Last week was an absolutely blistering reinforcement of just how much the story of the Bitcoin rally this cycle is institutional involvement. You'll forgive an extremely quick recap of last week. Tesla started it on Monday with their $1.5 billion Bitcoin announcement. On Wednesday, MasterCard

Starting point is 00:06:45 announced that it would be bringing crypto payments to its payment rails this year. Amazon had a job posting up for a position helping with its new digital currency project, which we still know nothing about. Twitter's CFO went on TV and said that they might put Bitcoin on the balance sheet in order to be able to pay employees and vendors. On Thursday, America's oldest bank, BNY Mellon, who's also the world's biggest custodian, announced that they were launching a digital asset custody business that was eventually going to grow from there. And we even had on Friday a little something different in Miami with the Miami commissioners voting to engage in a big education project on their way to potentially having much deeper Bitcoin integration across the city.

Starting point is 00:07:23 That's where we left things, but since then, two more big institutional stories broke. The first was around Deutsche Bank, and this one was interesting because it was actually kind of hiding in plain sight. In December 2020, the World Economic Forum published a report called Crypto. What is it good for? An overview of cryptocurrency use cases. The forward was written by CoinShare's CSO, Meltem DeMir's, and Vise's Kai Sheffield. On page 23, there's a profile of a previously unannounced Deutsche Bank Digital Asset Custody Initiative. Let me just quickly read what they say about their project goals. Deutsche Bank aims to develop a fully integrated custody platform for institutional clients and their digital assets, providing seamless connectivity to the broader

Starting point is 00:08:08 cryptocurrency ecosystem, introduce a secure, connected bridge between digital assets and a customer's traditional banking services, manage the array of digital assets and fiat holdings in one easy-to-use platform and create the gateway for value-added services either supplied by the custodian or via third-party providers. Ensure the safety and accessibility of assets for clients by offering an institutional-grade hot-cold storage solution with insurance-grade protection. Now, in terms of their implementation strategy, they're discussing a staged rollout. First, quote, provide insured digital asset custody for vetted digital assets on behalf of institutional investors such as asset managers, wealth managers, family offices, corporates, and digital funds. Second, provide clients with the ability

Starting point is 00:08:50 to buy and sell digital assets via a partnership with prime brokers, issuers and vetted exchanges to build out the seamless integration across platforms. Third, provide value-added services such as taxation, valuation services, and fund administration, lending, staking and voting, and provide an open banking platform to allow onboarding of third-party providers. Four, provide issuance and trading capabilities. So the key thing here is that they are starting with custody, but their eyes are much bigger than that. And again, this came out randomly in December. No one noticed it. Deutsche Bank is the world's 21st largest bank. It's also an extremely well-known banking brand. And this just really reinforces how big a battle there is going to be to attract especially wealthy clientele as they

Starting point is 00:09:35 get into this space. Now, our second story is a little bit more nebulous. On Saturday, Zero Hedges shared a Bloomberg headline saying that a Morgan Stanley division was considering a Bitcoin investment. According to Bloomberg, sources familiar with Morgan Stanley say that the group's counterpoint global investment unit is considering a Bitcoin position. To do so would require approval from both Morgan Stanley and regulators, but this is not a small little innovation fund. We're talking about a unit that manages $150 billion across 20 funds, of which five of those funds had more than 100,000. 100% gains last year. Now, Morgan Stanley is not completely virgin to Bitcoin. It already does have some exposure in the form of its almost 11% stake in micro strategy. That has obviously been a tremendously successful position, and analysts at Morgan Stanley have expressed a variety of

Starting point is 00:10:30 perspectives around Bitcoin. On the one hand, they've previously been complementary about Bitcoin's capacity to compete with the dollar. However, their most recent report noted that the stronger the impulse to hoddle is, the less appealing Bitcoin might be as an actual currency. Obviously, I think all of us will be waiting to see if this story has legs and what the position size actually is. But as we wrap up, what does this all add up to, both these two stories this weekend and everything that we discussed last week? Well, if nothing else, we are in the midst of a massively shifting narrative. CNN posted a story on Saturday titled Everything You Need to Know About Bitcoin. and tweeted it out saying, if you've been ignoring Bitcoin thinking it might just be a financial

Starting point is 00:11:15 fad, now's the time to start paying attention. Here's what you need to know. On Sunday, the banner headline on Bloomberg was, Bitcoin's epic run is winning more attention from Wall Street. Bitcoin nears $50,000 as it hits a record in weekend action. Of course, this being mainstream media, none of these stories gave anything new to readers, but what matters is their framing and their tone, and of course their audience. We're so used to the stories of Bitcoin Fudd and why it's boiling the oceans and everything else that to see that start to shift to focus on this momentum that we all feel, the tectonic plates of finance shifting under our feet that we feel is a remarkable thing. I'm sure that as we kick off this week, these announcements are just going to keep coming hard and fast,

Starting point is 00:12:04 and I'm excited to talk about each and every one of them with you guys. I hope you guys had a great Valentine's Day. Happy Monday, let's get this week. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - The Mainstream Media Narrative Shifts as Deutsche Bank and Morgan Stanley Come to Bitcoin

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