The Breakdown - Why Crypto Sentiment and Prices Are Soaring: Puppets, Pundits, Partnerships

Episode Date: February 13, 2020

After Monday’s quick retrace, bitcoin and the rest of the market went green again. In this episode, @nlw breaks down the shifting sentiment, looking at: How a partnership between Hedara Hashgraph and Google Cloud pumped HBAR more than 50% - featuring commentary from Hedara CEO Mance Harmon  Why Figure is launching a TV campaign to educate people about blockchain CNBC Fast Money actively (and convincingly) promoting the narrative of bitcoin as a safe haven asset.

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Wednesday, February 12th, and today we are looking at the return of bull sentiment within the market. Now, of course, over the weekend, we saw Bitcoin rise above 10,000, which is mostly important as a psychological barrier. Milestones like 10,000 not only reaffirm people's participation in the industry, but they also bring the attention from outsiders and people who are not as invested as we are in this space. But on Monday, we saw a quick retrace back under 10,000 and with it a real dreariness on crypto-Twitter. In fact, just about the only good thing that happened on Twitter

on Monday was that rage against the machine announced that they would be touring again. Luckily, the crypto market seemed to have gotten the signal, and by Tuesday the Bulls were on parade again. So today we are going to be breaking down the shift in sentiment, looking at prices, partnerships, puppets, and pundits. One of my favorite Bitcoin tweets of all time comes from the infamous Mr. Hoddle, who says, none of you, expletive, would be here. if number didn't go up. Explative, which you heard, price matters. This is from October of 2019. I think about this all the time when we've had a period of low energy that is followed by a period of high energy thanks to some price action. Bitcoin has hit its highest price in five months, and that

matters to the folks who are here, even if they are long-term hoddlers, even if they are not particularly concerned, and this price action isn't necessarily going to change any of their behaviors. Now, what's most interesting to me about this shift in price is actually a potential shift in the BTC narrative, but we're going to come back to that in the pundit section. Instead, I want to just briefly touch on how prices are impacting other assets as well. First, while much of the attention may be on Bitcoin, it's hard to deny that Ethereum is having an even better run. As of this recording, Bitcoin was up over 5% over the last 24 hours, where Ethereum was up nearly 15% to 255% per ETH. Especially in the wake of interesting and exciting milestones like a billion being locked in DeFi,

the Ethereum community is heading into this week's ETH Denver with an extraordinary amount of wind in their sales. And of course, it is not even just Ethereum as well. Tezos is up 20%, so much that people are actually actually. asking on Twitter, what's going on with Tezos? Why is it performing so well? Does it have to do with tokenized securities, which seem to be flocking to the chain? And then there's Link. The Link Marines, God bless them, have pumped this thing up to actual all-time highs. Link is above $4 per token. Now think about this. Even those assets that were excited about, Bitcoin and Ethereum, right? Bitcoin is currently standing at 53% of its all-time high. Ethereum is at 18% of its all-time high. Ripple, which is also

up 9% in the last 24 hours, is at 11% of its all-time high. Chainlink is at 100%. It is at its all-time high. It's hard to tell with price action like this how much is just rampant speculation versus something more fundamental. I will say that if you're interested in what ChainLink is doing and how it's finding an important role in the defy economy, go back and check out my podcast with Sergei Nazaroff and Kane Warwick from Synthetics. Sergey is the CEO of ChainLinks, Kane is the CEO of Synthetics, and they talk about ChainLink's recent announcement around decentralized price feeds. Whatever the reason, though, it's hard to deny that these assets are achieving something that is getting the market incredibly excited. But as I mentioned, that is not the only bullish signal

that we want to look at today. Next, I want to talk about something that is eerily and perhaps uncomfortably reminiscent of 2017 and 2018, which is assets pumping on partnerships. Hedara Hashgraph is a blockchain that claims to be a third-generation public ledger. That means to them as they have a different consensus model than things like Bitcoin and Ethereum. And HADARA Hashgraph has built a big part of its reputation around the companies who are interested in using it. Yesterday, we heard about a new partnership that got the market's attention. Google Cloud, it was announced, would be joining the governing council of Hedara Hashgraph.

I asked Mance Harmon, the CEO of the company, to explain. We've been using Google Cloud to run our test networks, both for the developer community and also for our own internal testing program in which we're preparing to upgrade the main network. The main network, of course, is distributed. Each council member runs their own node in a different cloud provider or on premises so that we have that decentralization across the main network. That's important. But using Google Cloud has made our test process more efficient, and we get a lot of value from that.

Second, a relationship with Google is important when we consider the architecture of the Hedera Consensus Service, or HCS. HCS enables private DLT networks and application networks to leverage the trust of a public network, the HEDARA public network. For example, the Enterprise Consortium may create a private network that is fully dedicated to a single application, but uses the public HEDARA consensus service

for putting transactions into consensus order. This unification of public and private provides the trust of a public network with the privacy, low cost, and performance of a private network. Google Cloud will make it easy for private networks to leverage HCS, and we believe this architecture is the future of distributed ledger technology generally. Finally, both Google Cloud and Hedera are focused on enterprise use cases, and I believe we are aligned in our vision of what Web30 will look like. Now, what interests me in the context of this larger question of the return of the Bulls

isn't so much Hadara Hashgraph or Google or what will happen there, although I think it is clearly worth watching, right? When you have a big company who's willing to put its name on something and go to press with them and all that sort of stuff, it's notable. However, what's interesting to me is what happened when this announcement was made. H-bar, the token of Hedara Hashgraph, surged from less than five cents per token, about four and a half cents per token, all the way up to 12 cents per token, something like a 70% gain, before we're tracing a little bit to where it is now, which is still something like 50% up on the initial price. The volume was also up massively. According to Nomics, the volume was up almost 10,000% over the last 20%. hours, which is just insane. So insane, in fact, that there were many who were having, I think,

a bit of PTSD looking back at 2017, 2018, and saying this is exactly the type of unhealthiness that we saw in the immaturity of crypto markets at that time, where simply the announcement of partnerships could make an asset price sore. Now, one example does not a trend make. And I think that before we jump into conclusions about a return of the sort of market dynamics we saw back in the day, we need to just watch and see whether this was something emblematic of a trend, or whether this was, in fact, a pump that had to do with an actually meaningful announcement, right? Google Cloud joining the actual governing group of an asset is much different than the sort of we signed up for Amazon, so now we're partnered with them that was so prevalent a couple years ago.

And speaking of a couple years ago, let's shift now to something. that absolutely didn't happen back then. TV puppets. Figure is quietly one of the fastest growing and most aggressive companies in the entire blockchain space. Founded by the same people who started SOFI, it is a blockchain-based lender for home equity lines, mortgage refinancing, student loan refinancing, basically personal finance type loans. This is obviously a space that is enormously competitive and takes a huge amount of money and figure has raised a significant amount of money. Well, just yesterday they announced that they were taking the idea of blockchain to the airwaves and creating a traditional ad campaign that would run both on online video

and on regular terrestrial TV. In Astorian Reuters, figures Chief Marketing Officer Brad Simmons argued that this was the perfect time to educate consumers. And so this ad campaign is basically introducing a mascot, which kind of looks like gray ice cube stacked together, but they're blockchain, obviously. It's four gray blocks with metal links on his sides. And basically, he's a know-it-all who will harangue anyone around him about what blockchain is and why it's so great and why they shouldn't be dealing with the white hairs at the bank and so on and so forth. Uh-huh. Okay. I got to go. Hey, I'm blockchain. What's up? You've either heard of me and you don't know what I do, or you've never heard of me and you don't know what I do. Or you know all about me,

in which case, I don't know how you're here. Go watch a cafe video or something. For the rest of you, here's what I do. First off, I'm not Bitcoin, cryptocurrency, or anything scary. Ah! Woof to you, too. In fact, I make things less scary. I improve financial transactions like loans,

behind the scenes, to make them more efficient, secure, and less costly. Which, if I work my magic right, can save you money. I'm a company's like Figure used to record, share, and exchange the data about your loan. Before me, this was all done manually, aka by people. And people can make mistakes. And then other people have to find those mistakes and correct them, which all takes time and money. So how does Figure do it differently? They use me to create an immutable record, meaning it can't be changed.

So the administrators, trustees, and other people who used to verify all that paperwork can have more free time to pursue their scrapbooking dreams. So whenever you use figure to get a loan, I make a block. Hey Carol. That block is a super secure digital record of the transaction. In fact, it's so secure in order for me to create or append a block, I have to share my block with a network of unbiased computers called nodes, from trusted financial institutions all over the country.

Yo! Hi. Oh, hey there. Howdy. And they all have to sign off on it to give me the go-ahead to make it. Good to go? Go for it! Which means I can always maintain the security and legitimacy...

Or truth state. Of your data, making it uncompromisable. Try to say that five times fast. Uncompromisable. Uncompromisable. She's actually doing it. I'm like a vault, except a super secure vault with many different keys that gives you a big long, disputed chain of truth or paper trail, but without all the paper. So with figure, we can pass that time and savings onto you.

So you can get out of this place and onto a better place. Like literally anywhere but here. Later. Figure, power by blockchain. So it's an interesting campaign. I think I have some questions around whether embodying blockchain as literally the blockchain bro archetype that is constantly made fun of on Twitter and anywhere that people make fun of things is the best strategic idea. However, maybe they own it in such a way that people think it's charming

or funny or it gets through. Either way, what's notable about the campaign is that it exists, frankly, and that a company in the blockchain space is willing to spend significant resources is to put an ad on regular terrestrial TV as well as online to push people to learn about blockchain and think they will care about it. So a pretty interesting moment in, I think, the industry's history. And certainly, as we're talking about the Bulls-on parade and bullish signals today, you've got to include it. And for our last discussion, I actually want to stay on TV,

although this time I want to talk about pundits and narratives. Whenever Bitcoin's price surges, especially if it's sustained, and especially when it hits milestones that matter like 10,000, it starts to be fodder for TV news pundits again. CNBC yesterday had a roundtable conversation on fast money all about Bitcoin in rally mode. And I really just want to play this clip for you so you guys can hear what they're saying about it. How's up for a graphic? Bitcoin's boom time continues back above 10.

thousand get this if you're not paying attention you probably should be bitcoin is now up 44% this year so tim we went from like zero to 20 000 back to 4,000 now back to 10,000 is anything different this time around i think what's different is first of all you've shaken out a lot of weak players you've shaken out a lot of the momentum you've certainly gone further down the road in terms of institutional uh you know follow through you've certainly had major bank in the world talk about their own blockchain platforms. You've had a dynamic where money has become freer than free. Gold's been rallying. Why shouldn't Bitcoin be rallying? I mean, I agree with you. I think that last part, if you talk about a Fed just gone nuts as guy thinks it has or all the

central banks going nuts, I mean, that's part of the bull case for Bitcoin. Plus, institutional interest as well. Yeah, but listen, so we got rates lower, we got gold up, we got utilities up, we got Bitcoin up. So it's all acting like Safe Haven. That just takes me back to the MAGA trade, what's going on there that just seems very bifurcated in this market where they're doing that heavy lifting. But these other things that we identify as safe haven assets have really perked up in 2020. Possible coronavirus impact here. I know a lot of the buyers come from that part of the world and you wonder if they're looking to protect their money, maybe hiding it in Bitcoin. Perhaps. But I do think to Karen's point, I believe that in a world where central bankers are

tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor, Brian. Well, it certainly has been, of 44% this year. All right. So that's that key quote. In a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In a world of fiat currencies, Bitcoin is the victor.

Now, keep in mind, there was no pomp on this show. There was no guest who is natively in this industry. This is just the conversation that they were having on fast money. So that's narrative exhibit A. narrative exhibit B is an article from this morning's The Guardian. Bitcoin bounces back over 10,000 amid coronavirus concerns. Investors seek safe haven because of fears over the economic impact of outbreak. This is the Guardian connecting explicitly the Bitcoin price rise with the coronavirus,

which frankly isn't even a narrative that we on Bitcoin Twitter are talking about. We are certainly talking about coronavirus, and there's an ongoing conversation that's almost a background conversation at this point around whether Bitcoin is a safe haven't been pushing this narrative. This is something that the Guardian is writing all on its own. So we have two instances here of mainstream media making the safe haven narrative argument for Bitcoin. Now, this is an important narrative moment because it exemplifies how narratives function like self-fulfilling prophecies. Over the course of the last six months, a year, whatever it is, each time there's some correlation between a

Bitcoin price rise and increased volatility in the market, which by the way is almost always happening, just based on the state of the world we're in, it adds credibility to the idea, to the narrative of Bitcoin as a safe haven asset, and then more people pick it up. And then when the next volatility happens, some additional number of managers potentially add it to their portfolio and talk about it with their peers. And then it's a little bit more real. not just a narrative. And this happens over and over until eventually it just is the place where capital flows when something bad happens. Now, skeptics of this obviously say that Bitcoin doesn't have any intrinsic value, that it's just speculation. Well, guess what? We live in a market where,

with the possible exception of just the plentiful availability of cheap money, that's the legacy of 10 years of quantitative easing as a normal policy now, narratives are the most important factor in how assets are priced. And the more that people believe that Bitcoin is a safe haven asset, the more that they will behave in the way that makes Bitcoin a safe haven asset. So there you have it. We've had pundits, we've had puppets, we've had partners, we've had prices. The Bulls are on parade, man. The markets are off to the races. Could all change by the time this is released. But for now, the shift in sentiment is real, it's interesting, and it's worth. breaking down. Thanks as always guys for listening and I will be back tomorrow with another

episode of The Breakdown. Peace.