The Breakdown - What Jack Dorsey Leaving Twitter Means for Bitcoin

Episode Date: November 30, 2021

This episode is sponsored by NYDIG. On today’s episode, NLW looks at two topics. The first is the market crash that left bitcoin down 8.5% on Friday, only to partially recover over the weekend. NLW looks at the combination of macro factors – led by the Omicron COVID-19 variant – that may or may not have contributed to the turbulence. Second, he looks at the announcement that Jack Dorsey is stepping down from the CEO role at Twitter, to be replaced by Chief Technology Officer Parag Agrawal. What will this mean for bitcoin? Will Jack be spending more time on the cryptocurrency now? And what about Ethereum? Will a Web 3 blocker inside Twitter now be removed? What about censorship and the Twitter platform itself?  - NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Cole Burston/Bloomberg/Getty Images, modified by CoinDesk.  

Twitter remains one of the most unique and valuable social networks from the Web 2.0 era. It is the global water cooler in a way that nothing else is even close to. There's a reason it's the epicenter of the entire crypto community. And ultimately, I care more about what the platform is like for the conversations itself than for any way that they happen to integrate Bitcoin or crypto or not. 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 Nidig and produced and distributed by CoinDesk.

What's going on, guys? It is Monday, November 29th, and today we are talking about what Jack Dorsey leaving Twitter might mean for Bitcoin. But first, obviously, we are just coming back from the holiday break. I hope you had a great Thanksgiving if you were in the U.S. and celebrating that holiday and a good weekend regardless. If you enjoyed that quick mini series of interviews, I have good news. With the end of the year coming up and obviously the Christmas and New Year's holiday lurking right around the corner, I'm probably going to do another end-of-year interview series like I did last year.

It'll be really similar, a fast, fun, 21-minute-style interview around the year that was and the year to come. But, obviously, as that series was going on, we were having some pretty wild times. My intention today was to do a deep dive on why Bitcoin flumped about 8.5% on Friday only to come roaring back. And I may do a deeper dive later this week because I think there's a lot of interesting things here, but I do want to start with a brief overview of how many macro factors were all converging at the same time. You had, of course, President Biden opening up the Strategic Petroleum Reserve, allowing 50 million barrels from the SPR to move onto the market

in order to try to bring down oil prices. That sort of market intervention from the presidential level is not exactly common when it comes to oil. You had another major Chinese real estate company, the property developer Fantasia, halting trading after missing loan payments, which brings up everything happening with Evergrand and the concerns that Chinese debt issues

might be a larger systemic threat. The Turkish lira dropped 12% in a day to an all-time low as inflation hovers around 20% in that country. One really interesting one, which seems small on the face of it, but may have bigger implications for how the world is trending. Uganda has a $200 million loan against the Antebe Airport from China. People have called this debt-trap diplomacy, and that seemed to be validated when a story broke that China was seizing the Ugandan airport

for non-payment of that debt. However, it seems like the real story is about renegotiating the deal, but still that notion that debt failure might look very different than an IMF slap on the wrist in a world of the Chinese Belt and Road Initiative is something that's probably worth keeping an eye on. Then there, of course, was weak consumer sentiment coming out of the U.S. around Black Friday. Black Friday shopping was down 28% from pre-pandemic levels. We'd seen numbers over the last few months suggesting that consumer sentiment was kind of low, so perhaps that isn't that surprising.

Also, a different way to look at this is that Black Friday spending this year was up 50% from last year, so perhaps it's really more of a mixed signal. But ultimately, the big thing that everyone was attributing, not just the Bitcoin market crash, but market turbulence in general too, was the emergence of the Omicron COVID variant out of South Africa. News started to come out around this around Thursday night, and that filtered into Friday morning. And the initial stages were effectively a total freak out. There was a chart going around. that showed just how viral this thing was, how fast it is out-competing other variants. And that, of course, had people hugely concerned.

Now, on top of that, there was some fast action from certain nations. Europe and Asia started suspending flights from southern Africa, and Israel shut down all international travel beginning Sunday evening. Now, we've seen this movie before, right? The first phase of the Delta variant had a similar market response, although perhaps not as whipsaw quick. The concern ultimately is not just a health concern, but a market concern, a worry that government response would be further lockdowns, further border closures, further impediments to economic

activity. Of course, shutting down flights from entire regions is a pretty good indicator of that. But it's also worth noting that markets weren't really well positioned going into this. First of all, Thanksgiving is going to be a time of low liquidity relative to normal market functioning. People just aren't out there trading in the same way. People are taking vacations. And so inherently, any market moves are going to be subject to more volatility. We've seen that over and over and over again. We've seen that in crypto markets as well. What's more, there was a lot of weakness in the technicals going into that low liquidity period. From zero hedge, and yes, I'm sorry to be quoting zero hedge, but their piece on this actually had some good information. It says, in retrospect, someone might have had a

correct feeling what was coming. Because headed into the Friday puk, the Goldman Sachs Prime Book saw the largest net selling in more than three months, driven by short sales and to a much lesser extent long sales, as the Goldman Prime Desk retails, single names and macro products were both net sold. On a geographic basis, managers reversed recent trends and rotated out of North America, which saw the largest net selling in seven months while moving into emerging market Asia and Europe. Eight out of 11 sectors were net sold in dollar terms by infotech, financials, and industrials, while staples materials and real estate were net bought. Powell inverted the Twitter account made it even simpler, saying, what if the sell-off had nothing to do with Omicron? Maybe it was just a

sell-off. There have, after all, been no shortage of technical signals pointing to a good probability of a top being formed here. Now, of course, you'll notice that things are now coming back up, and it seems to me that there are a couple of reasons. The first is that there were almost immediately counter-narratives around Omicron. The positive spin is that while this does appear to be more virulent, it is also potentially less harmful, and that's coming from a range of sources, including the medical professionals in South Africa who have been examining this disease, and also according to market watchers who have a strong financial incentive to have the right sense of how things are going to play out.

Alex Kruger tweets, Goldman brushing Omicron off. These guys have been spending big in studying coronavirus since early 2020. From the Goldman Report, this mutation is unlikely to be more malicious in that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths. End quote. On top of that, Moderna says they're already reviewing for a potential specific booster for next year. So if phase one of the reaction was freaking out, phase two is, hey, maybe this isn't actually as bad a thing as it seems. Second, there is, of course, a little bit

of buy-the-dip mentality and perhaps more than a little bit. Again, we've seen this movie before. Bears who were too slow to assume government support post-COVID got wrecked while the D-Gens made a killing. Sven Heinrich sums this up really well, saying, Friday, OMG, Amicron, Saturday, shut down everything. It'll take weeks to figure this out. Sunday, we got it all figured out. Buy everything. Bitcoin for its part was just faster on basically every part of the cycle. Faster to go down, faster to come back up. This is obviously something that we're going to watch. Amicron, regardless of what the truth is, is now going to shape the macro narrative for the next weeks to come, months to come, who knows. So it's something we'll be

keeping a close eye on. However, I want to move to our own. other topic, and that is Jack Dorsey reportedly stepping down from the CEO role at Twitter. NIDIG sponsors this podcast, and they're helping CFOs, traders, and risk managers, safely and securely integrate Bitcoin into their operations. Learn more about what NIDIG does and how they do it at NIDIG.com slash NLW. That's NYDIIG.g.com slash NLW. Dorsey's reign at Twitter has been somewhat contentious. He was the CEO until 2008 when he was pushed.

out, but then returned in 2015. Last year, Elliott Management, a large Twitter shareholder, tried to push Dorsey out. Their main concern, which, to be fair, has been shared by many, was Jack running two public companies at the same time. He is, of course, also the CEO of Square. Ultimately, Elliott Management reached a deal, but the concern remained, which is perhaps why markets seem to react very positively. Twitter stock initially bounced something like 11% on the news before trading being halted. I've seen many call this Jack getting the Steve Balmer treatment. Darrow Basino tweeted Twitter stock jumps 11% on rumors that Jack Dorsey is stepping down as CEO.

Microsoft under Balmer had a stock price penalty simply because Wall Street lost confidence in him despite great enterprise sales results. Twitter's been the same under Jack. As you might expect, this is all anyone is talking about on Twitter. Discussion one is censorship. Given that Jack presided over Twitter when it made major decisions like kicking Donald Trump, off the platform, some are cheering, saying that this will lead to a better era with less de-platforming. Others, on the other hand, are saying be cautious. Mike Salana tweeted,

people tend to conflate Jack Dorsey with Twitter censorship, but my sense is he's actually done what he could these past few years to keep the platform relatively open. Things will be worse without him, not better. Godspeed, Bird King. Hell, even Candice Owens quote tweeted someone who said, not a Jack Dorsey fan, but this means censorship is about to get much worse at Twitter.com. Candice Owens added, this is the right take. I've been telling people for years, Jack Dorsey is not your enemy. He's a prisoner at his own company. Moon Overlord takes this line of thinking into the crypto realm, saying, one of y'all better get the decentralized Twitter spun up quick before the new CEO takes over

and sends this entire space to the shadow realm because his teenage daughter said NFTs and Bitcoin are killing the earth. Stacey Herbert echoes saying, though we knew this day was coming, Bitcoin Twitter is about to be forced onto Mastodon or some other decentralized option, as the sidebar curators are about to have absolute control of this platform. That gets us to discussion too, which is the impact for crypto. Many in the Ethereum community are saying some version of this is good for Ethereum. DC Investor says, if I have to guess, Twitter's NFT and general Ethereum integration efforts will radically accelerate now, to be honest. The argument, of course, is that Jack Dorsey has been publicly not very much of a fan of Ethereum,

even something of an antagonist. Anthony Sassano said, well, Jack has been openly hostile towards Ethereum, even implying that he thinks it's a scam. So in my opinion, it's really a positive thing for Ethereum that he won't be at the helm of Twitter anymore. Now, of course, the flip side of the argument was that Twitter has been actively working on incorporating verified ETH NFT avatar profile pictures, which sort of begs the question, even if Dorsey was hostile, how much authority practically did he have? Discussion three then is impact for Bitcoin. There is strong speculation from many that Jack will now be freed up to spend more time on Bitcoin. Certainly, his other public company, Square, affords him more direct opportunities to.

Square has made a treasury commitment to Bitcoin while Twitter's CFO recently said that they would not be doing anything of the sort. Within Square, TBD is working on something very akin to a nascent decentralized finance layer on top of BTC, and other parts of the company are focused on Bitcoin mining ASICs and open source wallet development. So, could this just be an example of Jack deciding to focus on an area that's more important to him. Jason Yanowitz writes, Jack Dorsey stepping down as Twitter CEO is nothing more than a talented web two builder leaving for Web 3. Eventually, everyone capitulates. So what do I think? To be honest, I'm not sure. Part of me resonates with this tweet from Ryan Selkis at Masari. Sweet,

so now the only big tech company with a shot at incorporating crypto is meta. Welcome to Hell. time, it's very clear that Square is in more of a position to add value to the Bitcoin ecosystem than Twitter was. So I think that that is valuable. Moreover, I think that Jack is going to be an extraordinary ally for Bitcoin, whatever set of circumstances he does that through. So ultimately, I'm not that concerned. In fact, for me, I guess strangely, based on what I do every day, I'm sort of more interested in the implications for Twitter itself. Crypto, Bitcoin are going to march merrily along their way to adoption and to mainstreaming, and I don't really think that there's going to be much that a new Twitter CEO does to hamper that. But when it comes to Twitter itself,

I'm definitely in the camp of Jack having been more of a bulwark against censorship, rather than a leader of a censorship regime. I think that the complexity around public social network leadership is enormous. It is new. It is without precedent in terms of a society-shaping force. I think Jack has been a good faith steward of one of the essential platforms in that. regard, and who comes next could either be better or they could be much worse in navigating these tricky lines. Twitter remains one of the most unique and valuable social networks from the Web 2.0 era. It is the global water cooler in a way that nothing else is even close to. There's a reason it's the epicenter of the entire crypto community, and ultimately, I care more

about what the platform is like for the conversations itself than for any way that they happen to integrate Bitcoin or crypto or not. But at the end of the day, I don't think change necessarily means change for the worse. I think until we have more information about who the board chooses as the next leader, everything is just speculation. So I'll be watching it. I know you guys will be watching it too. And when that change happens, we'll be here to discuss it. Until tomorrow, guys, be safe and take care of each other. Peace.