The Breakdown - Welcome Back, Flippening Narrative

Starting point is 00:00:04 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 neared.org and produced and distributed by CoinDess. What's going on, guys? It is Saturday, May 1st, and that means it's time for the weekly recap. Yesterday, I went through the seven factions that I believe make up this crypto bull market. across any of them this week had something for everyone. From Bitcoin converting some big bank holdouts to more intrigue around the CBDC wars, it was chock full. It also saw a big uptick in factional fighting. So I'm going to talk about a few of those different factions. And of course,

Starting point is 00:00:52 we must start with Bitcoin. The biggest story in Bitcoin this week was not the price. It is worth noting that Bitcoin recovered nicely from last week's twin dips, coming back to spend most the week in the mid-50,000s. However, yesterday saw $4.2 billion worth of options expiry. We've seen this at the end of every month this year. Options expiry tends to compress volatility within a certain range. 54,000 was the so-called point of Max Payne, the point in an options expiry where the most people would get wrecked. The price tends to huddle around that point, and that's exactly what it did, although it broke out yesterday, as we know. No, that wasn't the big news. The big news for Bitcoin this week came from J.P. Morgan. J.P. Morgan Chase, which is America's biggest bank with

Starting point is 00:01:36 $3 trillion in assets, has historically been one of the most hostile institutions when it comes to Bitcoin. CEO Jamie Diamond, one of, if not the best-known banker in America, has variously called Bitcoin a fraud, worse than tulips, and even when he softened his stance, it was to calling it not my cup of tea. And yet, news broke this week that JPM was launching an actively made. managed Bitcoin fund for their private wealth clients as early as this summer. In February, we started to see cracks to the JPM facade when another senior leader went on cable financial news and said, yes, yes, of course, if there were client demand, they'd have to service Bitcoin, but they just hadn't been that demand yet. Lying, he was. Multiple sources with knowledge

Starting point is 00:02:20 say the fund will be launching soon and that it would be custodyed by Nidig. Nidig on their part selected U.S. Bank as a partner for their Bitcoin ETF, should their application be accepted. U.S. Bank also had other news investing in securities $30 million series B round and announcing they had selected a crypto custodian, although weirdly not who. Either way, net net, what you had was a week where the largest and the fifth largest bank both significantly upped their engagement with the Bitcoin space. This undoubtedly reinforced the connection between the Bitcoin bull market and big institutions. However, that narrative did face one challenge earlier in the week. On a Monday earnings call, we learned that Tesla had sold 10% of their

Starting point is 00:03:04 Bitcoin for $272 million. Let's hold aside that the $1.5 billion worth of Bitcoin that they announced purchasing in February, even after this sale, was worth $2.5 billion. As we discussed on a show earlier this week, the real point of the sale, according to Elon and his CFO, aka his master of coin, was to demonstrate Bitcoin's liquidity. I believe that this liquidity adds an entirely new dimension to the digital gold narrative that could be extremely relevant for Bitcoin in the months and years to come. Bitcoin is not just an inflation hedge. It's a global settlement currency with unmatched speed and finality,

Starting point is 00:03:43 and, as we saw this week, liquidity to boot. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Borrow against your digital assets at just 5.9% APR. earn passive income with yields of up to 12% and swap between more than 75 market pairs with the instant nexo exchange. Try the nexo wallet app to get the whole 360 degrees of crypto banking. Get started at nexo.io. Did you know nearly $338 million worth of NFTs were sent last year? And in 2021, that number's growing faster than ever. Looking to make your first NFT? Check out NIR's fast, scalable, low-cost, open-source

Starting point is 00:04:34 platform. Learn why NEAR is the infrastructure for innovation at NEAR.org. That's N-EAR.org to learn more today. Let's shift now over to one of our other factions, Ethereum. You can palpably feel the excitement in the Ethereum community right now. They're watching the ETH to BTC ratio rise. They're watching layer two scaling solution tokens rise. They're heralding the upcoming EIP 1559 as adding a whole new dimension of supply limitation to the argument for Eith. Where that's heading from a meme standpoint is the return of the flippening meme. This of course refers to when Ethereum is more valuable than Bitcoin. As you might expect, Bitcoiners are taking the bait and responding to the flippening talk in turn. Frankly, all of this making Twitter a pretty unpleasant and intellectually

Starting point is 00:05:29 vacuous place to be all week long. Here's the thing. I'm not really sure who the flippinging meme benefits other than satisfying some petty online battles. First, ETH cheering for BTC to fail is unfathomably stupid. The drag-down effect that that would have on everything else in this industry would be immense. Second, ETH has plenty of arguments for relevance as a serious asset outside of needing to also take on the Bitcoin's sound money argument. Being the default unit of account for DeFi and NFTs is pretty big given how much attention is there. Now, I'm not saying that the Ethereum community shouldn't be excited about shifts in monetary policy that they find beneficial. It just feels like they have bigger battles to fight on a higher level.

Starting point is 00:06:10 I kind of think Ari Paul was on the right track when he tweeted this. Most of the crypto world hasn't adjusted to the new normal of mainstream. We don't realize just how big and fast the pie is growing and are squabbling over crumbs. The entirety of crypto, by value, usage, number of holders in 2016, is now being added to the industry every month. There's minimal competition for developers, users, or capital. We have a flood of inbounds of each every month. The good?

Starting point is 00:06:37 There can be many winning projects, assets, and companies. The bad, minimal moats. New users and devs dwarf the old. Then again, you know what? Part of what I love about this industry is that it is absolutely pure play, unfettered capitalism, other than ideas and networks. So screw it. Ethereum's get after your ultrasound money and flippinging memes,

Starting point is 00:06:59 and Bitcoiners, bite back with your best about policy changeability and the whims of leaders. Ultimately, the markets will decide. One other cool note, I think, from the standpoint of defy. As I said yesterday, I think the biggest risk to defy is regulatory. I just don't think it's satisfied the gauntlet of regulators who I feel, frankly, could see a lot of systemic risk in the very composability that makes it so dynamic and exciting. Well, anyway, a former lawyer for the decentralized exchange project Zero X, Jason Somensato, turns out has joined the CFTC. He's the new acting director of Lab CFTC, which is the financial tech research division that they established under the leadership of Cryptodad, Christian Carlo. Now, on yesterday's show, I also talked about factions

Starting point is 00:07:44 that included the alternative to Ethereum chains and the Ponzi coins on TikTok, and I'm sure there's a ton going on with the all Ethereum chains, but to the extent this is a show about power shifts, I'm really not ready to cover the play-by-plays there. There's also probably a lot happening with TikTok Ponzi coins, but I'm not about to cover that either. That said, the stable coin and CBDC world did have some interesting things going on this week. First, both MasterCard and Visa mentioned positioning for the CBDC era on their earnings calls. MasterCard said they were investing in smart contract technology to build apps on top of CBDCs. This reinforces other reports that we got from MasterCard as early as last year about their interest in positioning to be a partner.

Starting point is 00:08:25 for Central Bank digital currencies. Visa's CEO Al Kelly also identified CBDCs as one of the five areas of opportunity that Visa is explicitly looking into in this space. Now, from an official perspective, Fed Chair Jerome Powell was much more cagey about CBDCs. That said, the fact that he has to discuss it, every presser after every FOMC meeting now, is notable. What he said specifically this time around is that the U.S. will not be drawn into a race with China. He said that China's version of a CBDC is too surveilly for the U.S. Frankly, this is good to hear publicly, although it's not like it's a really thrilling high bar to meet. Powell continues to say that it matters more to them to be right than to be first, which is, of course, a very incumbent way of thinking. That may be right for the U.S. dollar,

Starting point is 00:09:13 only time will tell. It feels to me like the CBDC part of this year's digital asset story is a little muted now for where it will end up by the end of the year. What do you think, guys? know in the comments on YouTube, hit me up on Twitter. And until tomorrow, be safe and take care of each other. Peace. We're witnessing the greatest paradigm shift in finance in modern history. Join thousands of newsmakers and influencers talking the future of money at Consensus by CoinDesk. A live virtual experience of leaders, change makers, virtual reality meetups, keynotes from Ray Dalio, Gary Vaynerchuk, and much more. Get an up close look at the boom in crypto, the surge in institutional investment in Bitcoin, the NFT mania, the breakneck innovation and decentralized

Starting point is 00:09:59 finance and the coming disruption from central bank digital currencies. The breakdown listeners can visit events.coindex.com and use the promo code breakdown to save $25 today. Join us, May 24th through May 27th for Consensus by CoinDesk, and register today at events.coindex.com, because ticket prices go up at the end of this month. Thanks for listening, and we'll see you there.

The Breakdown - Welcome Back, Flippening Narrative

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