The Breakdown - Think $100K BTC Would Stop Beanie Baby Comparisons? Think Again

Episode Date: December 8, 2024

A reading and discussion showing that some people will just never like Bitcoin. Featuring readings of: https://www.usatoday.com/story/opinion/columnist/2024/12/06/invest-bitcoin-trump-musk-cryptocurrency/76800410007/ https://www.wsj.com/opinion/bitcoin-prices-microstrategy-markets-assets-federal-reserve-810db1b9 https://www.ft.com/content/8533f856-57f1-4765-a3dc-d866543092be 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 Sunday, December 8th, and that means it's time for Long Read Sunday. 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. Well, friends, I apologize in advance for what. what I'm about to do to you. If you have a ragometer, it is about to go off the charts. Or perhaps you will

just delight in the taste of salty tears. But for anyone who thought that 100K Bitcoin would bring with it some broader consideration and maybe a humility among people who have critiqued it in the past, boy. Boy, oh boy, oh boy, were you wrong? We're going to read three short essays today, which I think will reinforce for you the idea that the people who don't like Bitcoin will never like Bitcoin at any price. We'll kick off with the most measured of them, a piece from the Wall Street Journal editorial board about what Bitcoin's price says around the larger state of the market. And for each of these, I will, of course, be turning it over to an 11 Labs version of myself. So here is quote unquote me reading the Bitcoin boom and easy money.

If financial conditions are as restrictive as Federal Reserve Governor's claim, markets haven't received the message. Bitcoin surged past $100,000 for a day this week, while the Dow Jones Industrial average is near 45,000. Investors are partying like the high times won't end, and it's hard to blame them when the Fed has promised more lubrication. Our friends in the financial press are chalking up the Bitcoin rally as a bet on a more crypto-friendly Trump administration. No doubt the prospect of friendlier regulators contributed to the cryptocurrencies, 124% surge this year. But asset prices are high across the board, gold, junk bonds, stocks, often fueled by speculative and leveraged bets. One of the biggest momentum trades is

micro-strategy stock, which has gained 464% this year. Despite generating little revenue, the 35-year-old small software firm is valued at $91 billion. How so? It has amassed a huge Bitcoin Reserve now worth roughly $41 billion. Investors have piled into its stock as a way to make a bullish bet on Bitcoin. Micro Strategy in October announced plans to purchase more than $40 billion in Bitcoin, which drove more buying of its stock and Bitcoin. How does Microstrategy fund its Bitcoin purchases? With convertible notes that can be exchanged for equity at a later time, investors buy the notes on the bet that Micro Strategy's stock price will keep climbing. As with the meme stock rally in early 2021, everything is swell as long as the music keeps playing. But if Bitcoin prices drop and leverage

trades start to unwind, the dissent in Micro Strategy shares and Bitcoin may be as sharp as the ascent. In other words, don't bet your retirement on Bitcoin or Micro Strategy. Bitcoin prices have long been volatile. They tend to rise and fall with broader markets, even though the cryptocurrency supporters tout it as a hedge. Prices crashed some 75% as the Fed tightened in 2022. Bitcoin is soaring now on as monetary conditions. ease. There are other signs of market exuberance, rational or not. The Russell 2000 index of small cap stocks has climbed nearly 30% over the last year. These companies tend to be more affected by macroeconomic policy changes, so investors may be betting on strong growth and deregulation.

Still, the index's price earnings ratio of 36 recalls the dot-com bubble. Expectations of artificial intelligence driving productivity advances might also be helping fuel the euphoria. AI chipmaker, Nvidia's stock is up 211% in the last year, but that doesn't explain the rally in high-risk debt. The last time junk bond spreads over treasuries where this tight was in 2007, and before that in 1997, when markets were similarly flush with money. There are no signs now of a liquidity shortage. Frothy asset prices and stalling disinflation may even indicate that financial conditions are too easy. The core consumer price index that excludes food and energy has been stuck at 3.3% since June. Even the Fed's preferred price gauge, the personal consumption expenditure, PCE price index,

has stopped its downward trajectory. Fed Chair Jerome Powell observed Wednesday that growth is definitely stronger than we thought, and inflation is coming a little higher than in September when the Federal Open Market Committee, FOMC, cut interest rates by 50 basis points. Markets interpreted that aggressive cut, followed by 25 more points in November, as a signal that the Fed considered its fight against inflation as one. It's not. Fed officials are signaling they'll cut another 25 points this month. But we're hard pressed to recall a central bank that cut rates with inflation this sticky, growth this strong, and asset prices this gaudy. Caution is advised. All right, back to Real NLW here. So that one at least is really understanding or trying to

understand Bitcoin and what it says about macro. It's certainly not a full-throated endorsement of Bitcoin. It's a little bit dismissive. But it's also a really understanding. nothing like what you're about to hear. The next post by Rex Hubkey at USA Today will show you that unbelievably in the year of our Lord 2024, with Bitcoin sitting at over $100,000 a BTC, we are still going to get Beanie Baby's comparisons. It's the Bitcoin Boom Baby. I'm bailing on Beanie Babies and investing Biggley. Great news, fellow Dream Chasers. Bitcoin is booming and we are all going to be rich. If you pay attention to mainstream media sources, I don't. You've probably seen headlines like Bitcoin tops $100,000 as Monster 2024 rally reaches new heights, and Bitcoin breaks $100,000 barrier amid post-election

cryptocurrency surge. USA Today reported, the price of Bitcoin surpassed $100,000 for the first time Thursday amid expectations that Donald Trump will create a friendly regulatory environment for cryptocurrencies when he heads to the White House next year. Woo-hoo! It's raining difficult to comprehend cryptocurrency that is apparently rooted in nothing but vibes but somehow still exists, according to the anonymous person or persons who created it. Hallelujah. I haven't been this excited about obtaining oil barren level wealth since the Beanie's boom of the mid-1990s. Back then, we were taking sharp investment advice from people who predicted unprecedented returns on plush-stuffed animals with names like Nip the Cat, Inky the Octopus, and Bongo the Monkey. They knew what they were talking

about, as evidenced by my three mortgages and the 37 large plastic bins filled with beanie babies that I call my attic-based retirement. But now the Bitcoin craze is buoyed by even more reliable people, con artists. Chief among them, of course, is President-elect Donald Trump, who has made a fortune and become leader of the free world by persuading people to spend $30 on cheap-looking red hats. Trump is all in on crypto, and he touted the Bitcoin News Thursday on its social media site, Truth Social. Congratulations, Bitcoinsers, $100,000. You're welcome. Over the first three quarters of this year, Truth Social made $2.6 million in revenue, while losing $363 million, and its stock was trading Thursday at about $34 a share compared with the $1.66 per share

high in March after it hit the stock market. Needless to say, I will walk through fire to follow Trump's rock solid instincts and investing advice. Trump ally Elon Musk, famous both for paying way too much for Twitter so he could destroy it and for creating the overpriced electric car presently burning in my driveway, is also a strong crypto advocate and he doesn't seem at all weird or volatile. Same with Vivek Ramoswami, who Trump has paired with Musk to form the made-up Department of Government Efficiency, which is an acronymic reference to Dogecoin, which is another type of pretend currency I don't need to understand to believe in. The fast-talking Ramoswami doesn't sound at all like someone who would show up on a late-night informational and try to sell me a forward mortgage to go with my reverse mortgage, or a

knock-off shamwow. So you better believe I'm going to follow the lead of these not-at-all self-serving billionaires and ignore the so-called experts and Nobel Prize-winning economists out there, saying Bitcoin is wildly risky. Did the U.S. Justice Department seize more than $112 million linked to crypto investment schemes last year? Perhaps. And did federal processes, Martin Estrada say in a statement at the time, using the methods of traditional con artists, high-tech fraudsters, have taken advantage of the publicity and hype surrounding cryptocurrency to encourage an untold number of Americans to invest in get-rich-quick schemes. Yes, sure, but that overlooks my desire to get-rich-quick, which inherently requires a get-rich-quick scheme.

Duh? Did Eric Maskin, a Harvard professor and winner of the 2007 Nobel Prize in economics, recently tell the Miami Herald that cryptocurrencies are very far from being a safe investment. And did he also say, cryptocurrencies are a very good way of conducting criminal transactions and hiding them under anonymity? Don't threaten me with a good time, Prof, Maskin. When you say, far from being a safe investment, I hear, I don't want you to invest in this great investment so there's more of it for me to invest in, sucker. Nah, I'm going to go with the guys who will benefit for me believing everything they're telling me. It's high time I sink my life savings. into a thing that doesn't technically exist. And if anything goes wrong, I've always got my

attic full of beanie babies to fall back on. Those things are going to be worth a fortune any day now. Back to Real NLW here. I think this line of critique was inevitable. As soon as Trump embraced Bitcoin, there was always going to be a subsection of people for whom that just condemned it forever, no matter what. And that's certainly what you're seeing here. Lastly, let's turn it over to the fine folks at F.T. Alphaville, perhaps the longest-running, dismissive voice of Bitcoin and Crypto, for what they termed Hodler's an apology. Regular readers of FT. Alphaville may have formed the impression that its current and former writers are united in skepticism about crypto in general, and Bitcoin in particular. This is correct. FTAV posts between June 2011 and today

may have communicated the idea that Bitcoin is a negative-sum game, being played on a protocol that's very clever and hypothetically useful as a unit of account, but is chronically inefficient as a conventional means of exchange and is compromised as a store of value. Our post may also have promoted the idea that the price of a Bitcoin is an arbitrary hype gauge that's disconnected from any utility the token may have, because it's trivial to duplicate the utility provided by said token, so any intrinsic worth comes from the sunk costs of infrastructure alongside intangibles like regulatory acquiescence, interconnectedness with mainstream financial systems it was once sold as being the antidote to and the souvenir attraction of being the first. We stand by

every single one of those posts. Nevertheless, with Bitcoin's price recently crossing $100,000, a significant number of commenters seem to feel they deserve an apology in light of our long-standing cynicism. So, here it is. We're sorry if at any moment in the past 14 years you chose, based on our coverage, not to buy a thing whose number has gone up. It's nice when your number goes up, and we're sorry if you misunderstood our crypto cynicism to be a declaration of support for Tredfee, because we hate that too. Back to Real NLW again. Boy, the salt is so, so salty.

One of the longest standing memes in the Bitcoin space is HoneyBadger Don't Care. And it's a reflection of the idea that as much as we as the failable human individuals who are part of the Bitcoin ecosystem can sometimes get caught up and frustrated and antagonistic or antagonized, Bitcoin itself, as a protocol, as an asset, simply does not give a poop emoji around what the folks at FT. Alphaville or USA Today or any other publication think. It exists for the people who need it, whether they need it because they live at a place where currency devaluation is a common occurrence, or whether they need it because they want to have a vote out of the systems they live in, no matter where it is. Bitcoin is there for them.

I said earlier this week that I think that the greatest testament to 100K will be that feeling that you have six or 12 months from now when it feels really in retrospect just like any other day in the inexorable march of history, and I would repeat that idea again here. I, for one, am very excited to see the absolutely cosmic levels of salt will see when we hit a million dollars per BTC. For now, though, enjoy your moment, enjoy the week. You earned it, and no amount of op-eds can take that away. Until next time, be safe and take care of each other.

Peace.