The Breakdown - Trump Changes His Tune on Bitcoin

Episode Date: March 13, 2024

As the world gets used to a new Bitcoin all-time high, all manner of folks are reevaluating their previous stances. On this episode, we discuss one of the highest profile shifts, which comes from former President Donald Trump. Today's Show Brought To You By Kraken - Go to https://kraken.com/thebreakdown and see what crypto can be Ledger - 5% to Bitcoin Developers When You Buy https://shop.ledger.com/pages/bitcoin-hardware-wallet 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 Tuesday, March 12th. And of course, as promised, today we are digging into Bitcoin above 70K. 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 in the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to Bit.L.Y slash Breakdown. pod. Hello friends. Yesterday morning, as we discussed oh so briefly at the beginning of the show, Bitcoin blew through the previous levels to reach 72,000. Unlike previous attempts, there was no question. This was the new price. No quick rejection, no quick turnaround. And indeed, Bitcoin

held that range all the way through the night, passing along each time zone with little movement. Now, we did lose a little bit earlier in the day, but at the time of recording, we're at around 71,500, so barely off the high. Monday's move was accompanied by no major liquidation cascade. Some leverage was wiped out, but no more than any other random Monday in the past few months. Futures open interest is at all-time highs with 35.8 billion in current positions. In previous cycles, open interest at these levels would be a bright flashing warning sign. However, during this run-up, the CME has become the dominant venue for futures trading, bringing with it better capitalized participants and massively reduced leverage. In other words,

record high open interest simply doesn't mean the same thing it did in 2021. That said, funding rates on crypto-native platforms are definitely creeping up. Longs are paying an annualized rate of 21% to hold their positions. Historically, that's high, but nowhere near the peak of 45% reached during the last bull market. The high funding rate means there's a risk that leverage will unwind rapidly if there's a dip, but by itself it's not enough to trigger a sell-off. The splashiest price-related headline from Monday is that Bitcoin has now surpassed the market cap of silver to become the eighth largest global asset. Bitcoin now is a market cap of $1.4 trillion, which is ahead of number nine, Google, who has a market market.

a cap of $1.6 trillion. One of the most notable things about Monday's price action was the impact it had on Bitcoin credibility and coverage. Throughout crypto winter, the easy mainstream narrative has been that Bitcoin is dead because the industry crumbled around it in 2022. Of course, those of us who remained have told anyone that would listen that the failures of that cycle had nothing to do with Bitcoin, just the companies surrounding it, and frankly, not just the companies, but mostly the fraudulent ones. Until this week, that story just wasn't getting through into traditional financial media. And if we're being honest with ourselves, there is something understandable

about that. In that, there is basically no precedent in the centralized financial system of an asset surviving institutional collapse. The dot-com bust in 2001 scared retail investors away from stocks for a decade. The 2008 financial crisis left meaningful scars across a host of housing and banking-related markets. Meanwhile, in 2022, a dozen of the largest crypto companies declared bankruptcy. The administration tried to kill off the industry that remained. And yet, Bitcoin is already back above all time. highs. That, my friends, is pure undiluted signal for the mainstream that says that this asset class is real, it's not going away, and it's not just us who think so. As you might imagine, 72,000 brought Bull Take Central with it. For example, Samson Mao writes, we haven't even really started

the price run yet. Faces won't be melted, they will be atomized. Haley Lennon, a partner at Brown Rudnick, cribbed a common theme writing, 72K Bitcoin and most of you aren't even going crazy. This year's going to be nuts. Vlad Kustia pointed out something similar, saying that Bitcoin broke 72K, but the Coinbase app is still ranked 128th in the App Store. We're still early. Will Clemente, meanwhile, writes, with Bitcoin now at all time highs, the headline gap risk to the upside is tremendous for anyone not allocated. Only need one high-profile billionaire or one sovereign wealth fund to announce even a minor allocation, and this thing likely melts up, similar to Tesla last cycle. Will is of course referring to Elon's famous, in retrospect, it was inevitable, when Tesla

followed Michael Saylor into the world of Bitcoin on the balance sheet, although don't forget how that story ended with Tesla backing off just a couple months later, and Elon's whims in some ways starting to let the air out of the balloon. This time, however, the new folks reconsidering really do represent a different set of voices. Maybe most notably were comments from presumptive Republican presidential nominee and former president Donald Trump. Also, quick caveat on this before we get into the story, one of the things I see quite a bit whenever crypto media covers anything about Trump, is accusations that Bitcoiners will like anyone who likes their orange coin. It's not a totally unfair critique in some situations, however. Like him or loatham, this guy is a

former president and a very formidable presidential candidate. It would be irresponsible not to cover what this person says about crypto. So with that out of the way, early on Monday morning, Donald Trump called into CNBC's squawk box. He was asked about crypto and said, well, it's taken on its own life. You know, I do little things sometimes for fun and, you know, make money with it and have fun with it too. Joe Kernan cut in at this point to ask whether that means Trump has bought Bitcoin, to which Trump answered, no, no, but sometimes we let people pay in Bitcoin. Harkening back to his previous comments on Bitcoin, Trump said, it's like an additional form of currency. I used to say I want one currency, I want the dollar. I don't want people leaving the dollar, but I will tell you

it has taken on a life. Trump discussed his limited run Trump sneakers, but also may have been confusing them for his NFT collection, noting, so many people were buying them with these crazy new currencies. I couldn't believe the amount. People are using it. In Trump's mind, crypto is still linked to wars. He said, I hate when countries go off the dollar. I would not let countries go off the dollar. When we lose that standard, it will be like losing a revolutionary war. We can't let that happen. Trump also spent some time complimenting Jay Clayton for his work as head of the SEC, noting that there were no scandals. And summing up, Trump turned back to crypto policy stating, there has been a lot of use of that, and I'm not sure I would want to take it away at this point.

Today's episode is brought to you by Cracken. For far too long, the whole financial system has been standing still, too slow, only on for certain hours, overly designed for some types of people, but not for others. Crypto, at its best, represents progress. It asks the question, what if? It invites people in instead of leaving them out. It's on 24-7-365 and moves at the speed of real life. Not everyone believes it. We've got our fair share of detractors, but that's the way it always is when you're building something new. Cracken is a crypto company that has been through the highs and lows of the industry, facing forwards towards progress throughout. And now they're inviting us to see what crypto can be. Learn more at crackin.com slash the breakdown. Disclaimer, not investment advice.

Crypto trading involves risk of loss. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures Inc. PVI, BVI, DBA, CRACEN. Hello, breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, it's another chance to think about your Bitcoin custody best practices, and of course, to help all the new folks do the same. Ledger is the global platform for securing Bitcoin and other crypto. Ledger combines both hardware wallets and the Ledger Live app to offer the best way to buy, sell, swap, and stake without sacrificing on security or self-custody. Ledger features cutting-edge technology in the form of a certified secure chip and a proprietary

operating system, but also brings ease of use. This makes Ledger a safe and secure way to manage your digital assets. sets without all the stress. Check out the link to the Bitcoin Ledger Nano in the show notes. 5% of all sales of the Bitcoin Ledger Nano go to support Bitcoin development. Thanks once again to Ledger for supporting the breakdown. What makes this all the more notable is that this is the second time that Trump has talked about crypto over the past month. At a town hall event in February, Trump said that many people were embracing Bitcoin and it's something he could, quote, live with it one way or the other.

So what does this mean? Does this mean that Trump is a pro-crypto candidate now? No. But even if one views this as cynically as possible and views Trump as just testing the waters to see what messages will resonate with potential voters. You have to be pretty interested in the change of his tune on this area. Given that he's brought it up twice now and that the second time was even more positive than the first time, it seems clear that his political instincts are suggesting that this might be a winning issue. Alex Kruger summed up just what a difference five years makes, pointing out that Trump in 2019 said, I am not a fan of Bitcoin and other cryptocurrencies, which are not money and whose value is highly volatile and based on thin air versus Trump 2024, who said, I make money with Bitcoin,

but I have fun with it too. Sometimes we'll let people pay through Bitcoin. It's an additional form of currency. Of course, a lot of the commentary out there right now, given that we are coming off of a second Operation chokepoint is a partisan U.S. battle. Nick Carter, for example, wrote, anyone saying Republicans are just as bad for crypto is out of their mind. Orange Man has a lot of bad qualities, but being anti-crypto isn't one. A lot of DC cryptotypes like to say this because they don't want to burn bridges with crypto-friendly Dems. That's fine, but I'm more interested in the actual reality, which as Republicans are overwhelmingly more pro-cry. Dan McArdle, a co-founder at Masari, writes, I'm no Trump fan, but hard to argue he's as bad as Biden for crypto. It was always

an insane argument, but people used to point to his one mean tweet. Well, he's flipped on that, and Warren continues to have Biden's admin push a slew of dirty behind-the-scenes regulatory attacks. Not everyone's buying it, though. Kaborga-box writes, Trump now sounds bullish on Bitcoin. Personally, I don't believe him. He and his administration had a shot for supporting Bitcoin. It was hard, if not a full stone wall to work with them. Trump pushed hard against something where he could have been baseline decent and built huge support. His staff and agencies largely represented the same view. It matters what you actually do. Miko Otama responded to that, pointing out, Trump is a populace, so he says anything to get elected,

true or not. Now on this question of the D's versus ours, anyone who's paying attention closely will tell you that relative to U.S. issues, crypto remains shockingly bipartisan. Still, it's hard to deny that the administration in the White House right now has had anything but contempt for this asset. The White House has published its 2025 budget proposal and is taking another shot at crypto tax measures. The proposal includes a change that would treat crypto the same as other assets when it comes to wash sales. This measure is uncontroversial within the industry, and frankly, it's fairly amazing that it hasn't been passed yet. One reason why it might not have been is that it makes for good headlines. I.e., alongside their proposal, the White House wrote that their budget

would, quote, close a loophole that benefits wealthy crypto investors. Now, much more importantly, the administration has renewed calls for a 30% excise tax on the electricity, used in Bitcoin mining. The White House claims the tax would reduce the deficit by $7 billion. Critics, however, suggest that all this tax would achieve is pushing the industry offshore. Senator Cynthia Lummis tweeted, The White House 2025 budget is incredibly bullish on crypto assets. Some might even say they believe it's going to the moon. But a proposed 30% punitive tax on digital asset mining would destroy any foothold the industry has in America. End quote. The tax would require

extensive reporting of the hash rate and electricity usage of mining facilities, which has been a controversial goal of the administration over recent months. It would also apply to miners who generate their own power or tap into off-grid power, hindering some of the most exciting use cases for smaller Bitcoin miners. Bitcoin Policy Institute fellow Troy Cross really got to the heart of the matter saying, in a market with a fungible product, identical machinery and free instant transportation via the internet, a 30% tax is a de facto ban. All American miners would shut down or move. Global revenue would be unchanged. Emissions would likely go up, pure posturing. One more quick note on on ETF inflows as we wrap up this 72K coverage. Unsurprisingly, last week set a new record

high for inflows into global crypto funds. 2.7 billion was added surpassing the record of 2.4 billion set four weeks earlier. The numbers were dominated by US-based Bitcoin ETFs, which captured over 95% of net flows. The most staggering part of the report wasn't the weekly flows, but rather the cumulative impact of the Bitcoin ETFs. In 2021, global crypto funds saw 10.3 billion worth of inflows for the year. That amount is set to be exceeded next week, just three months into this year. Inflows from just this year now account for 14% of the Bitcoin assets under management globally. Overall, global crypto funds now manage 94 billion in assets, around 3% of the total crypto market cap. Trading volumes also hit an all-time high, reaching 43 billion for the week,

roughly a 50% increase compared to the previous week. In terms of the start of this week, Monday's U.S.-based ETF flows were extremely strong, but not quite at record levels. BlackRock took in another 562 million, its fourth largest day over the past two weeks. Fidelity and Bitwise, meanwhile, performed slightly above average with arc slightly below average. Van Eck and Valky meanwhile had record days after weeks of underperformance. Vanek announced that fees would be slashed to zero until the fund reaches $1.5 billion in assets. This likely triggered the 118 million worth of inflows. With the change in policy, Van Eck managed to gather twice as many assets in a single day than they have in the past two months. And so friends, that is the story from here.

Lots more exciting things going on. We will have more takes and news later this week, but for now that is going to do it. One more big thank you to the sponsors for today. show, go to cracken.com slash the breakdown and see what crypto can be. And of course, a big thank you to Ledger. Check out the Ledger Bitcoin Nano, where 5% of sales go to Bitcoin Development. Until next time, be safe and take care of each other. Peace.