The Breakdown - The World Is Never Getting Off Government Stimulus

Episode Date: October 31, 2020

On this week’s weekly recap, NLW looks at: Bitcoin’s resilience in the face of a week where many investors went risk off, causing a drop in stocks and gold JPMorgan’s dramatic three-year attitude shift around bitcoin and crypto  Iran stockpiling bitcoin to be able to pay for imports A new round of COVID-19 lockdowns and the stimulus that will follow

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 crypto.com, nexo.io, and elliptic, and produced and distributed by CoinDess. What's going on, guys? It is Saturday, October 31st. Happy Halloween. Happy end of October. Happy Sam Wayne. Happy transition into the holiday season. Today we're going to be talking about why the world is literally never getting off government stimulus. But first, let's go through a few other things that happened on this weekly recap. First of all, let's start with the fact that Bitcoin has been extremely bullish this week. We punched through 13K on the day the news of PayPal happened.

And then in the early part of this week on Wednesday, markets everywhere went risk off because one, COVID was rising. Two, lockdowns were brewing. And three, no one, believe this election was actually going to be over in a week. On that day, European stocks actually hit a five-month low, and everything was off. Gold was down 2%. Stocks in the U.S. were down as much as 3%. Bitcoin, even, for about 10 minutes, dipped under 13K, but then the bulls raced back in and said, nope. It's now Friday. We've just had a large number of options expire, and again, we're still above 13,000. At about 13,000, 250 at the time of recording. I feel like for as bullish as we always are on Twitter, there's not enough people talking about the fact that this price just hasn't budged despite a lot of reasons

that it might have. So next, let's shift over and look at J.P. Morgan. First of all, there was a report they had from last week about Bitcoin's competition with gold. That came out on October 23rd. Alex Kruger flagged it and tweeted, J.P. Morgan from Bitcoin as a fraud and will blow up in 2017, to Bitcoin's competition with gold in 2020. We've come a long way. And hell yes, we have, Mr. Kruger. Hell yes, we have. Then there's the fact that JPMorgan actually launched commercially its JPM coin. Now, this is an internal stable coin that will be used for billions, if not trillions of cross-border settlement, and will likely blaze a path for every competing bank to follow suit. To me, this is a part of a larger supercharging of the stable coin space

and really an upscaling of the questions of private money. And then there's Iran. So the Coin desk piece was called Iran Amends Law to allow imports to be funded with cryptocurrency. And here are some of the details. Strapped for international currencies, Iran is turning to cryptocurrency to allow imports to continue to flow. The change means legally minded cryptocurrency in Iran can only be exchanged if used to fund imports from other nations. Miners will supply the cryptocurrency directly to the CBI within an authorized limit. Cryptocurrency has become increasingly important to Iran as the nation suffers from economic

woes brought by U.S. sanctions in the coronavirus pandemic. Iran Daily suggested that using Bitcoin for import payments could help the nation avoid sanctions that impose limits on Iran's access to the dollar. DeCript reinforced these themes, saying today's move, at least at face value, isn't so much about exports as it is about paying for imports. In a speech to the Council on Foreign Relations last December, Brian Hook, the U.S. Special Representative for Iran, said, quote, the regime is struggling to acquire the foreign currency they need to procure imports such as machinery, industrial inputs, and consumer goods. Nick Carter tweeted this article and said, is there any way to interpret this

other than an admission that the Central Bank of Iran is actively stockpiling Bitcoin? Am I reading this correctly? Blockfolio in their normal pithy way tweeted, we went from asking which country will ban Bitcoin to which country will buy Bitcoin in only a few years. The upshot of this is a new potentially massive source of demand for Bitcoin. Countries starting to actually stockpile Bitcoin as a reserve asset could be a huge force, obviously, in the demand equation for this asset. The downside is that nothing could get the U.S. to want to ban Bitcoin more. aggressively than for it to become a state-level sanctions avoidance tool. This is the literal nightmare scenario when it comes to adoption if we want it to stay outside the purview of U.S. aggressive action.

And I know a ton of you will say Honeybadger don't care, but look, this is a potentially big deal. This potentially provides cloud cover for all of the enemies of Bitcoin to make it extraordinarily narrowly difficult for people in the U.S. to actually interact with it in any meaningful way. I'd like to think that there are enough advocates starting to emerge in Congress and the Senate for that not to happen, but it does concern me. This episode is brought to you by Crypto.com, the crypto super app that lets you buy, earn, and spend crypto all in one place and earn up to 8.5% per year on your Bitcoin. Download the Crypto.com app now to see the interest rates you could be earning on BTC and more

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Going back to recapping the week, then there's Europe. In the last 14 days, the U.S., France, Italy, Germany, Britain, Sweden, all have reported record numbers of new daily infections from coronavirus. In various places, lockdowns have returned. In France, on Wednesday, President Emmanuel Macron said the country would quote, brutally apply the breaks until at least December 1st. This means no social gatherings, no restaurants, no bars. Citizens are only allowed to leave home for essential work or medical care. Germany followed suit announcing a lockdown from November 2nd to November 30th.

Restaurants and bars are only available for takeaway, theaters, gyms, pools, movie theaters all will close. Maximum 10 people from two households can meet. And the leadership there is worried again about overwhelming the health system. Italy also had the return of some version of lockdown, saying that gyms, pools, movie theaters will all be closed until November 24th and that bars and restaurants have to close at 6 p.m. This led, as I believe it probably would in the U.S. as well, to see significant protests sweep through the country. Back to the U.S., we are ourselves setting records for new caseloads, and we're seeing the start of response as cases rise in 40s. 37 states. There are, of course, the much maligned and, I believe, patently absurd and unenforceable

California guidelines for Thanksgiving. But then you have the governor of Illinois, who has also banned eating and drinking inside bars and restaurants. You're going to see a lot of this, I think, in the U.S. I think most politicians understand that it is effectively political suicide at this point to try to get a full-scale lockdown happening. So you're going to see these very specific restrictions instead. But really what we're interested in is what this all means, and the answer, you know it, say it with me, stimulus. From the Wall Street Journal this week, ECB signals further stimulus ahead to prop up struggling economy. The European Central Bank indicates likely action in December to soften the economic impact of lockdowns. Christine Lagarde said the ECB was there for the first wave, the ECB will be here for the second wave, and will deploy the same flexibility.

In response to this stimulus expectation, the Europe dipped to a four-week low against the dollar. The chief currency strategist at Mizzouho Securities was quoted as saying, the economy in Eurozone is deteriorating at a faster pace than expected, and some view that monetary easing won't be enough to lift the Eurozone or that it will be too late in December. Such reactions probably pressured the euro to fall. And then, of course, in the U.S., every day the top headline is about the stimulus. And things got a lot gnarlier over the last couple days. From another Wall Street

Journal article, discussions between House Speaker Nancy Pelosi and Treasury Secretary Stephen Mnuchin took on a decidedly less cordial tone Thursday as the Trump administration's top negotiator accused his counterpart of miscasting the state-of-stalled coronavirus stimulus talks days before election day. Effectively, no one cares about anything in the economy right now other than what type of stimulus we're going to get how much of it and how fast. On Monday, I'm going to do a show about who is better for Bitcoin in the election, Biden or Trump, and you'll see that a lot of people's assessment is that it simply doesn't matter because the dye has been cast and the world is not, at least until a whole different level of crash, getting off of government stimulus.

Anyways, guys, as spooky as that is, I hope you're having a very fun Halloween doing whatever you are with your family, enjoying some socially distanced trick-or-treating, I guess. Luckily, our daughter is only two, so we don't have to deal with that quite yet. But I'm very sorry to all the parents out who are trying to figure out how to give their kids fun and safe Halloween's. I'm thinking about you, and I appreciate your listening. And until tomorrow, be safe and take care of each other. Peace.