The Breakdown - Was This The Craziest Week in Bitcoin History?

Starting point is 00:00:00 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 nexor.io and stacks2.com and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, January 9th, and that means it's time for the year's first weekly recap. And holy hell, what a first week. it has been. So on today's show, I'm going to talk about four things. I'm going to talk about price, I'm going to talk about macro tailwinds, I'm going to talk about seismic regulatory shifts, and I'm going to talk about momentum. So let's start by talking price. There are a few interesting

Starting point is 00:00:49 things about the price right now. The first is, of course, how big it is. Bitcoin hitting $40,000 within the first week in January is not something that I think a lot of people had on their bingo cards for this year. And of course, that gets to the second part, which is how fast it's moving. We couldn't quite get to 30,000 at the end of last year. As soon as January hit, it was game on, and it's just been rocketing up ever since. The third part of price that's really interesting is the type of momentum it's generating. For some reason, hitting the all-time high in the 19,000s, and then even hitting the psychologically more significant number of 20,000 didn't really get the FOMO cycle moving. You didn't see people popping up on MSM. You didn't see mainstream

Starting point is 00:01:38 journals reaching out for comments. It didn't even happen at 30,000, maybe just because people didn't have a chance to catch up. They were just coming back to their jobs for the week. But 40,000 hit like a bomb, and all of a sudden you're seeing all of those telltale signs. Like I said, we'll come back to that in the momentum section, but it really is clear that for whatever reason, the doubling of the previous all-time high was the real big significant momentum-building moment. And this gets into the fourth interesting thing about the price, which is the resetting of expectations. Barry Silbert has had a great set of tweets on this, where he said something to the effect

Starting point is 00:02:15 of crazy how $20,000 Bitcoin would feel like an absolute steel buying opportunity. He then said that about $30,000 as well, making a joke about how fast this is changing. But I think that this resetting of expectations piece is really important, and it gets to the fifth part of what I find interesting about the price, which is how fast any dip is being absolutely gobbled up. On Thursday, when we hit $40,000 for the first time, we crashed into a crazy cell wall, or at least it seemed like that. And we dipped $30,000, $3,000, $3,000, $3,000, $3,000,000, something like that in a matter of minutes. And the question I had then, because almost immediately it started going up again, was how long it was going to take before that dip was gone. Well,

Starting point is 00:03:02 I woke up this morning on the east coast of the U.S. to $41,000 Bitcoin, so that, that's how long, less than 24 hours. And it shows just how much this demand cycle is still growing. Yes, there are some folks on Twitter, particularly those who are a little bit more removed from the core of the community who are starting to ask, is this the time to take some profits and to get out? I've seen a lot of that. But it feels like the Bitcoin core is just scooping every new sell offer that comes on the market. And that's, of course, to say nothing of the institutions who are buying. Second, though, let's talk macro tailwinds. The Georgia elections earlier this week were a huge moment. We're back in the blue wave narrative that was driving markets to excitement at the end of October in

Starting point is 00:03:51 the beginning of November. And of course, the whole idea here is that a Democratic win in a convincing victory, where they held not only the presidency, but the Senate, would mean the ability to pass much bigger, more aggressive stimulus bills. Well, as I went through on yesterday's show, we're getting the first glimpses of what that stimulus might mean. It's everything from $1,400 direct checks to citizens to huge amounts of infrastructure. It's happening exactly as people are anticipating. And this is, of course, happening as institutions are en masse loading Bitcoin onto their balance sheets. It's hard for me sitting from where we sit to not see how this buying pattern and this narrative buying cycle doesn't run quite a bit more, even though it's hard to grapple with how fast the price is going up.

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Starting point is 00:05:50 For more information and to register for the Stax 2.0 launch event, visit Stacks2.com. That's Stacks followed by the number 2.com. Third, let's talk about seismic regulatory shifts. I believe that we are 100% not grocking just how massively huge a deal the OCC's guidance from Monday actually was. The quick recap for those who haven't listened to that episode or just haven't been around or who, I don't know, got distracted by $40,000 Bitcoin or something, the Office of the Comptroller of the Currency,

Starting point is 00:06:27 which is currently headed by acting director Brian Brooks, who is the former chief legal officer at Coinbase. On Monday said effectively that federally regulated banks were allowed to use public blockchains and stable coins just like existing financial infrastructure. They were allowed to use stable coins for settlement. They were allowed to use public blockchings for payment rails akin to Swift and ACH. This was something that I don't think anyone anticipated happening that

Starting point is 00:06:55 fast, and it absolutely opens the floodgates for banks and other major regulated financial institutions to integrate and interact with existing crypto asset infrastructure. The question, of course, is will banks be interested in? And so for that, you have to think about who banks' customers are. Let's hold aside consumers or retail for now because that's a slower moving demand cycle. I believe where we're going to see huge demand for new access to crypto market infrastructure through these regulated financial institutions comes in the form of electronic markets firms. These are banks' most sophisticated users. They are the ones who spend the most money, who move the most money, and they desperately want faster, cheaper, and better everything.

Starting point is 00:07:40 They are the most sensitive to speed and counterparty risk, and this set of new infrastructure could be transformative in how they do business, how much they do business, how much risk they take on. It feels, in fact, to me in many ways, and this is entirely speculative and not based on any inside information. I want to make that super clear. It feels like Brian Brooks doesn't think he's going to have a job after the Biden administration comes in. We've already seen that there's a lot of contentiousness around the way that he's run the OCC and his aggressive guidance in terms of being so pro-crypto. It's what caused some people in Congress to respond with the Stable Act. I think that he doesn't think that he's actually going to get that full term. And so what I

Starting point is 00:08:24 think this play is is effectively letting a genie out of the bottle. When you create the opportunity for these very important customers of banks to show that they have huge demand and huge amount of money on the line for this new technology, you create a whole new set of market activities that are enormously difficult to roll back even if they put someone new in the OCC chair. Now, I could be wrong about that, but that is my read on the situation, and I think that we're going to see over the course of the year just how big this shift really is. Lastly, let's talk momentum, and I started getting into this around price, because of course price is the thing that creates the most momentum. But we're seeing it show up in a lot of different

Starting point is 00:09:09 ways. You're seeing searches on Google rising for Ethereum and for Bitcoin. You're seeing Coinbase. It's now the last time I looked at number 25 on Apple's free app list up from something like 300 just a few days ago. You're seeing celebrities like Meek Mill start to tweet about crypto and Bitcoin and wanting to get in. So what that momentum really means is of course demand. new demand, and the other side of demand is supply, and supply is in short order, both from the context of those institutions buying that we've been talking about day after day, but also because there is so much activity on the actual mining side. Bitmain is not delivering miners. They're sold out of mining machines through August now. It just keeps growing longer and longer and

Starting point is 00:09:57 longer. The point of this is, of course, you have this unbelievably perfect storm of macro tailwinds, of new buyers coming in, of faux-mowed retail buyers, and no supply at all. It is head-spitting how fast the price has gone up this week. And every part of me thinks that the natural state of things is to correct and come down. But we've been saying that for $20,000 now. And there's a part of me that's starting to think that we have to run this up a lot higher before people have that insane clawback moment. I don't know where it is, but I know that.

Starting point is 00:10:34 But 2021 is something else. I hope that you are off to a great start with it. I hope that you're reevaluating your goals and seeing how you can achieve them and resetting your context because 2021 might be as crazy as 2020, just in entirely different ways. Anyways, guys, I appreciate you listening. And until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Was This The Craziest Week in Bitcoin History?

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