The Breakdown - Why Bitcoin Is Making Some Legendary Investors Emotional

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 nexus.io, neer.org, and genesis trading, and produced and distributed by CoinDes. What's going on, guys? It is Monday, May 3rd, and today's one of the types of shows where it's kind of like an extended brief. Each of the topics is shorter than a full-length show, a little bit longer than a brief. It's because there's a lot of different news that justifies part of his show, but maybe not the whole show. To kick it off, let's talk about the controversy from this weekend. There were two examples of people ragging on Bitcoin this weekend that had the community inflamed. The first was comedian Bill Maher. He tweeted

Starting point is 00:00:52 cryptocurrency is like Tinkerbell's Light. Its power sources based solely on enough children believing in it. And unfortunately, what is real is that its growth could single-handedly push global temperatures above the tipping point of 2 degrees Celsius. He then linked to a video of his 8-minute segment on this topic. So, a few thoughts about this. First, I swear, I don't know anyone who gives a crap about anything Bill Ma has to say about anything anymore. He's been so amorphous and unclear about who he's trying to piss off. I guess maybe there's some weird set of people on the boomer Gen X cusp who actually care, but honestly, at this point, I just don't know. Second, a huge number of very important things in our lives exist only because big groups of people believe them to exist. It's kind of an

Starting point is 00:01:35 important part of human existence. So there's that. Third, and much more importantly, this two-degree Celsius claim is from the thoroughly debunked paper of the same title from the University of Hawaii in 2018, Mora at all. You've heard about this ad nauseum if you follow Nick Carter or if you heard my reading of Nick Carter's piece from a few weeks ago. This is just bad science. It doesn't hold water. Fourth, and maybe most relevantly, as we get deeper and deeper into this bull market cycle, get ready for this to be normal. As people, particularly those with a business model that relies on clicks or views or anyone paying attention really, realize how much engagement they can get talking about Bitcoin and crypto, especially tearing apart or trying to tear apart Bitcoin and

Starting point is 00:02:20 crypto, they're going to, whether they have an interesting opinion or not. The honeypot of our attention and engagement is just too big to ignore. If you want examples of this, just look at the number of people on FinTwit who have made their career diving on over into our conversations just for the sake of the clicks they get. It's not surprising to me that a second or third tier late night entertainer is going down that path as well. But as you can probably tell, I think this one is pretty ignorable. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Barrow against your digital assets at just five 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.

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Starting point is 00:04:04 on Genesis Trading.com for insights from the firm gathered from across their spot trading, derivatives trading, lending, custody, treasury, and prime brokerage business lines. Visit genesistrading.com today to learn more. The less ignorable commentary was this savaging of Bitcoin from Charlie Munger during the Berkshire Hathaway annual meeting. Quote, of course I hate the Bitcoin success. I don't welcome a currency that's so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out your extra billions of billions of dollars to somebody who just

Starting point is 00:04:40 invented a new financial product out of thin air. I think I should say modestly that the whole damn development is disgusting, and contrary to the interests of civilization. Whoa, whoa, Charlie, let's take it down a notch. Now, these are the rat poison squared guys, so this isn't totally surprising, but still the vitriol was enough to capture some attention. Now, the charitable take comes from Alex Kruger, who tweeted, Munger's approach to coping with Bitcoin's success is hate. Can't be rational when hate is involved. Money managers that don't adapt to technology changes have a hard time outperforming.

Starting point is 00:05:16 So the relevant context for this is that Berkshire Hathaway, while obviously a legendary firm, has significantly underperformed during the tech era. For the last 15 years, it hasn't beaten the S&P 500. Indeed, they have had an intransigence not just to Bitcoin, but to, many facets of technology. And perhaps that's fine. Remember this old line from Charlie himself. Quote, I never allow myself to hold an opinion on anything that I don't know the other side's argument better than they do. Clearly, he's not following his own advice here, however. Now, another, I believe, reasonable response is the clapback around their investments in,

Starting point is 00:05:53 one, banks that have been continuously complicit in money laundering and have even faced various criminal charges, and two, a company that has had dramatic and deal with, militaria's impacts on the health of people around the world. This is, of course, Coca-Cola. Nirajagrawal from Coin Center put it perfectly. He tweeted, Hello, I've made all my money from selling sugar to the world's children. I'm here to tell you about moral investing. These guys can invest in whatever they want. However, if they're going to argue that some investment that they didn't make is wrong from a civilizational perspective, they have to be prepared to hear about the things that they have invested in in terms of their

Starting point is 00:06:29 civilizational impact. But the thing that was actually the craziest to me was the number of people who were yelling at Bitcoiners for responding. Like, oh, you jerks, of course you had to take the bait. Now, mostly this was people on FinTwit giving some tired version of, different people can have different investing philosophies, it's fine. But even the headline from this publication, CoinDesk, was, quote, crypto Twitter shows no respect for age in responding to Charlie Monaster. as though that's somehow the point. One of the most influential investors in history said the success of the thing that everyone in this industry has in common is disgusting and contrary to the interest of civilization. That's a person who doesn't want any of us to be doing

Starting point is 00:07:12 what we're doing right now, to be who we are right now. Sure, different people may have more or less classy ways to bite back, but of course it is reasonable to do so when someone is coming out with that level of aggression at such a fundamental thing. I am literally the living meme of Will Ferrell and Zoolander feeling like he's taking crazy pills when people say that Bitcoin shouldn't take the bait. Anyway, let's talk about some other things. When I ran a poll this morning about what you guys wanted to hear about, by far the winner was Taproot. I totally hear that. I just didn't have time to do it justice today. And I want to make sure to give you a full picture when I do. So instead, I'm just going to cover it really briefly and why you started hearing about it this weekend.

Starting point is 00:07:55 Here's how documenting Bitcoin the Twitter account described what's happening. Quote, the largest update to Bitcoin in almost four years. A privacy and scalability improvement, Taproot, has begun activation. Here's how Alan Farrington described it when Blockworks Jason Yanowitz asked for and explain it like I'm five. You know all your crayons? Well, we're going to put them all in a blender, even if you haven't used them or if you use them once to draw a line or something, shit. Then if someone looks at your drawings and says, what crayons did you use? You'll say, I know, but you never will. So what happened over the weekend is that Taproot began what's called its speedy trial. This is a three-month activation window. The idea is that there needs to be a certain

Starting point is 00:08:34 threshold of miners to signal for the upgrade. Assuming this threshold is achieved, Taproot activates in November. Assuming they don't, it only wasted three months. This caught users' attention on Twitter when green squares started showing up everywhere, most prominently from Jack Dorsey himself. Dorsey tweeted the green square and a web URL taproot. Watch, where you can watch which blocks have actually signaled for the taproot upgrade. As I said, this deserves an entire show, but I will just point out that this portends a much larger discussion about privacy in Bitcoin that I think is likely to dovetail with regulatory conversations, so we'll probably be pretty white-hot over the next few months.

Starting point is 00:09:14 Speaking of the government, the Digital Dollar Foundation is launching CBDC tests. So the Digital Dollar Foundation is a private group. It's a collaboration between Accenture, the big consulting firm, and some former U.S. regulators, most notably Chris Giancarlo, the former head of the CFTC, who's been sometimes referred to as crypto dad. It's a private effort to push the U.S. into the CBDC age. And if you hear Giancarlo talk about it, he has a very strong reason why when it comes to what's good for the world, the U.S. is a better choice to have a CBDC than someone like China. I've heard him point out numerous times, for example, that the Constitution regulates the privacy of said currency and limits what the government can actually do and see where no such

Starting point is 00:09:58 rules, no such restrictions exist in China. So on the one hand, the Digital Dollar Foundation is an advocacy group pushing for these ideas, but on the other hand, they're trying to actively advance the research as well, so that the Fed has more to work with when it inevitably, at least in their estimation, gets in the game. They're currently launching five pilot projects, which are meant to evaluate if and how a digital dollar would benefit financial access for the unbanked or underbanked. Now, one of the privileges the U.S. feels that it has in being able to wait to really go deep on central bank digital currencies is the dollar's place as the world's reserve currency status. From a network effect standpoint, they're certainly

Starting point is 00:10:38 correct. People around the world continue to want to transact and settle in dollars. I would argue, though, that one of the other benefits the U.S. has is that there is so much private activity around digital dollars already happening. It would be ultimately, I believe, a quintessentially United States approach, something unique to the United States, for the ultimate digital dollar to be some sort of public hybrid built on the work started in the private sector, be it from the digital dollar project, USDC, or payments rails companies like Visa and MasterC, retrofitting their systems for a new age. Speaking of, let's get to our last topic.

Starting point is 00:11:15 The block is reporting that PayPal is exploring launching their very own stablecoin. They're saying that four sources with knowledge say that PayPal has, quote, made the rounds among some of the industry's stable coin protocol developers. The only one named is Ava Labs. The company, for their part, gave a non-denial denial. Quote, PayPal continues to explore the potential of digital currencies, digital financial services infrastructure and how we can help enhance digital commerce as a trusted partner in the space. As a global company working with regulators and industry partners throughout the world,

Starting point is 00:11:46 to shape the next generation of financial systems, the company is in frequent conversation about technologies that enable these goals. However, rumors and speculation are not predictive of the company's future plans. I will point out that the last time there was a big rumor about PayPal, it was in the pages of CoinDesk who heard from sources last summer that PayPal was working on a crypto integration. That ended up obviously being very true. So why would PayPal want this? The short answer is settlement. There's a reason that JP Morgan shifted its enterprise blockchain focus to instead develop a

Starting point is 00:12:17 global settlement currency for internal use. That's JPM coin. PayPal, with its millions of merchants around the world, might be trying to do something similar. Question of course becomes whether they build it or buy it, and one source had an answer, or at least an instinct for that. Quote, it looks like they're more likely to do something with an existing stablecoin partner rather than build something themselves, because I think that that would get something to market

Starting point is 00:12:40 faster, and I think that's their primary concern. I guess I just want to sum this up, referencing an interview you guys actually haven't even heard yet. I did an interview today coming out later this week, where one assertion of my guest is that the breadcrumbs that we see on Bitcoin Twitter of institutions getting in this game are very much the tip of the iceberg of true activity. So perhaps this move from PayPal isn't that surprising after all. Anyways, guys, I hope you had a great weekend. I'm excited to be here all week with you. 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

Starting point is 00:13:26 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 and institutional investment in Bitcoin, the NFT mania, the breakneck innovation and decentralized 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. Thanks for listening, and we'll see you there.

The Breakdown - Why Bitcoin Is Making Some Legendary Investors Emotional

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