The Breakdown - Why Crypto Sentiment is So Bad Right Now

Episode Date: February 11, 2025

Despite $95,000+ sentiment is absolutely in the garbage. NLW explores the reasons, from memecoin misery to macro. Sponsored by: Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today.Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

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. What's going on, guys? It is Monday, February 10th, and today we are talking about a sentiment wipeout. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, we have a bit of a grab bag episode today, lots of small topics that will all be bundled together.

But we kick it off with the frame, which is that sentiment has gone from bad to worse as the crypto market bleeds lower. Bitcoin fell below $95,000 on Sunday, hitting a one week low, and expressing a sort of disbelief that I think is pretty common right now, Bitcoin Munger wrote, if you told me last year that Bitcoin would be at $96,000, coupled with the most constructive fundamental backdrop imaginable and sentiment would be this bad, I would not believe you. But here we are. Now, Bitcoin itself is only down around 13% from the all-time high set three weeks ago,

far from the usual 30% bull market pullbacks. And realistically, sentiment on Bitcoin Twitter itself isn't too bad, especially among the non-traders. But everywhere else, the vibes are feeling very, very low. THG wrote, way too many people apparently full-ported microcap or meme coins, huh? That was a risky move. The crypto market now has over 11 million coins, and that's just the ones that did well enough to be listed on Coin Gecko. In 2017, the list contained 1,300 alts.

And even that felt like far too many to keep track of. Attention and therefore liquidity is much more dispersed than we've ever seen. And even the influencers are finding this all a little ridiculous. Ash Crypto wrote, 52,000 tokens were launched on Pump. Dot Fun yesterday, and you wonder why we're not getting alt season. This needs to stop where people need to stop gambling their money on these launches. Over the weekend, Pump. Fun coins from Dave Portnoy to Baby

and the president of the Central African Republican live. Kanye West decided that meme coins prey on the fans and say, he has no plans to create one. The trenches are getting more and more incoherent as the cycle drags on. Jeff Dorman, the CIO of ARCA, noted that this is a very different cycle and we aren't seeing market-wide alt-coin rallies. He tweeted, this is why everyone is so angry. What made you rich in 2021 ain't going to work again, and CT is realizing they no longer have or never had an edge. The easy everyone wins money is over. Huge gains are still coming, but for less tokens and less investors. Big difference. BitWi's CIO Matt Hogan commented that he's seeing the polar opposite in the institutional space,

tweeting, there is an absolutely massive disconnect between retail and professional sentiment in crypto right now. Retail sentiment is the worst it's been in years, while professional investors are extraordinarily bullish. It's like living in two completely separate worlds. In terms, crypto volume on the CME hit an all-time high last month, largely due to a 12% rise in Bitcoin futures trading. Ethereum volume was actually down 13% in January, implying that Bitcoin is really the major focus. Jeff Park, Bitwise, head of Alpha Strategies noted that market structure itself is very different this time around, commenting, people played alts for levered beta in the past. This cycle, we have 10x payoff Bitcoin

options, micro strategy 2x levered ETFs, and other DGEN trades with more predictability. So Bitcoin wealth will stay in Bitcoin but in different forms of compliant leverage, especially because of the rate cycle. While some are calling for the bottom in altcoins because sentiment can't get much worse, cold-blooded Schiller has a different hypothesis, tweeting, price can't go lower because there are simply no sellers left. Others are pointing to the idea of a Bitcoin-only cycle. Crypto-Chuk wrote, this is why we Bitcoin. The people that are complaining are the ones over leveraged in alts. Now, speaking of Bitcoin, Trump, Media and Technology Group, which is the holding company

for Truth Social, announced that they would launch three ETFs, covering the themes made in America, energy independence, and Bitcoin Plus. No one seems to have a firm idea what a Bitcoin plus ETF would hold. CEO Devin Nunes simply said the firm was, quote, exploring a range of ways to differentiate our products, including strategies related to Bitcoin. Some thought it might add all coins to the mix. Casa CTO, Jameson Lop, tweeted. Bitcoin plus Trump coin? I think many are hoping it's something more like that than an attempt to launch a new coin called Bitcoin Plus. Bloomberg's senior ETF analyst Eric Bukunis was more interested in the quickly shifting norms under Trump, tweeting, Trump is going to launch a Bitcoin plus ETF.

Safe to say, first ever potus ETF issuer. What a country. He did point out that Trump Media Group isn't technically a White House department, but noted that Trump still controls a majority stake. Now, you have to think, to the extent that the vibe shifts are anything other than just all coins underperforming. There is a lot of macro instability right now. Now. On Sunday, President Trump announced 25% tariffs on steel and aluminum imports. When asked who the tariffs would apply to, he responded to everybody. These tariffs are in line with policies from 2018, which were largely aimed at Chinese dumping, and many are taking this as a strong sign that Trump is continuing to plow ahead with establishing a tariff regime. Even as markets try to

make sense of whatever that's going to mean, though, separate comments to reporters were to some even more intriguing. Speaking to assembled press aboard Air Force One, Trump said, we're even looking at treasuries. There could be a problem you've been reading about that with treasuries. There could be an interesting problem because it could be that a lot of those things don't count. Therefore, maybe we have less debt than we thought of. It wasn't immediately clear what Trump was referring to, and neither the White House or the Treasury Department responded swiftly to media requests. Trump could be simply referring to the publicly reported operations of Elon Musk's Doge, while the federal court slammed the brakes on the operation with an injunction on Saturday,

Doge has done significant work, itemizing payments coming out of the Treasury. It's possible that Trump was referring to problems at the Treasury Department rather than problems with Treasuries, the collateral asset of the global financial system. But if Trump was discussing U.S. government bonds and bills, that is an entirely different thing. It's extremely unusual for a sitting president to cast doubt over the treasury market. To do so casually on a flight to the Super Bowl with no clarifying comments is even more strange. The baseline assumption has to be that Trump misspoke, but some ran with a literal interpretation. There was the breathless take that selectively defaulting on interest payments is a terrible idea. Journalist Matt O'Brien wrote,

defaulting on some treasuries would be financial Armageddon. Treasuries are the lifeblood of the financial system. Banks use them in all kinds of transactions as basically money. If they turn out to not be riskless, you're looking at a self-inflicted 2008 crisis. National security expert Matthew Pines commented, this is either Trump mouthing off after we read some random tweet or a bunch of bondholders were about to get rugged. When economic advisor Stephen Miron said that we should make holding treasuries as a reserve asset less favorable by charging fees, I don't think this is what he meant. By the time the final touchdown was scored, it turned out to be fake news. Politico's Victoria Guida tweeted, an administration official tells me he was not talking about U.S.

Treasury's just payments made by Treasury. Now, in terms of how much all of this is affecting the mood, something that overall market reaction was muted and people are getting used to this as the new norm. Economist Alex Kruger observed, tariffs news starting to lose their punch. Hello, friends, I am thrilled to share that Ledger is once again partnering and sponsoring with the breakdown. Many of you know, but for those of you who don't, Ledger is the most secure hardware wallet for your crypto and logins.

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Ripple co-founder Brad Garlinghouse, Circle CEO Jeremy Allaire, Coinbase CEO Brian Armstrong, and Crypto.com CEO Chris Marzolic. The Blocks, Frank Shapiro, was also named as a potential member, which I would be hugely in support of. The council will have 12 seats for industry figures, so maybe there is room for a crypto-twitter emissary. One source told the post, everyone in their mother is begging to be on this council, but no one has heard who might make the cut and there is no application. The post emphasized that no decisions have been made and this list is far from final. Separately, the CFTC has announced a crypto CEO forum to discuss the launch of the agency's digital assets pilot program. The forum will include Circle, Coinbase, Crypto.com,

Moonpay, and Ripple. Details were a little slim on what this pilot would entail, simply stating that it would deal with, quote, tokenized non-cash collateral such as stable coins. Outside the U.S., crypto game theory commits a pace. The Czech Republic appears to be establishing themselves as the most crypto-friendly country in Europe. A few weeks ago, we covered the Czech Central Bank governor's proposal to buy Bitcoin as a reserve asset. That policy was shot down in no uncertain terms by ECB governor Christine LaGarde the following day. Then again, technically, she isn't in charge of central bank policy among EU nations, so we'll see how that dispute shakes out. But since then, the Czech Parliament has signed a pair of bills that would make the Eastern European nation an attractive

home for startups and investors. The first piece of legislation clarifies taxation of crypto and implements the EU's MECA regulations. A blog post from the Czech cryptocurrency Association said the parliament has implemented Mika, quote, in a way that supports innovation and the development of the entire industry. A second bill provides major tax advantages for holding and using crypto. Investors will pay zero capital gains tax on any crypto held for three years or more. In addition, transactions of up to $4,000 do not need to be reported to the office. This kind of de minimis exception has been argued for in the U.S. for years as a way to make Bitcoin lightning payments viable without creating a huge tax reporting burden. And while this tax treatment is much better

than most Western countries, this would actually be a normalization policy that ensure that crypto is treated the same as stocks and bonds. And there's certainly lots of reason to think that crypto should be treated in the same light. Indeed, as crypto starts to become part of the mainstream financial systems, some crypto firms are already major financial institutions in their own right. Coinbase CEO Brian Armstrong remarked, If you think of Coinbase like a bank, we now hold about $420 billion in assets for our customers, which would make us the 21st largest bank in the U.S. by total assets and growing. If you think of us more like a brokerage, we'd be the eighth largest brokerage today by AUM. If you think about us like a payments company, to be honest, I'm not sure

where we rank on that list. There are various ways to measure it, but there are about 30, trillion in total stable coin payments last year. The point is, with crypto, the line between these categories is blurring. He went on to question how the financial system should be reformed with crypto as an integral part. Armstrong suggested that easy access to yield-bearing accounts and sound money should become the norm. And this is, of course, another reason that it's so critical to update regulations during this administration. Crypto exchanges are starting to become as important as major brokerages and banks. Lastly, an interesting speculation today from Tether CEO, Paulo Arduino. On Saturday, he tweeted prediction. Quantum computing is still very far

from any meaningful risk of breaking Bitcoin cryptography. Quantum-resistant addresses will eventually be added to Bitcoin before there is any serious threat. All people alive and that have access to their wallets will move Bitcoin into new quantum-resistant addresses. Any Bitcoin in lost wallets, including Satoshi, if not alive, will be hacked and put back into circulation. Now, obviously, this has been a big point of discussion, how quantum computing will affect Bitcoin. While most experts think we're still a decade away, at least, from useful quantum computing, this week, researchers at Oxford demonstrated a method of quantum networking, unlocking the ability to link multiple chips together for the first time. The general idea is that quantum algorithms

will be able to decipher private keys from public key information. Proposals for updating Bitcoin to be quantum resistant have already been made, but they rely on users migrating their coins to new wallets. For that reason, the damage is more likely to come from a wave of old coins being hacked and sold rather than a catastrophic failure of the blockchain. Analyst Willie Wu remarked, the main question is, who will hack the 3,700 Bitcoin that are lost? Google, Mnesea, China, some new quantum computing venture. This is a $350 billion lost treasure salvage operation. We'll be trillion soon. Hence, lost Bitcoin will eventually accelerate funding into quantum computing. Then again, developer Lawrence Day wrote, if SHA 256 is broken,

we've got way more to worry about than someone altruistically deciding to release lost tokens. Imagine someone market selling all burn address contents into an exchange order book to say nothing of the fact that the entire internet just breaks. We're not close to this yet, but yeah, we do need to be moving to quantum resistant encryption scheme sooner rather than later. Better to do it when we're 20 years out than when it's breathing down our necks. And so I think as all the other fud dissipates and disappears, we've still got good old quantum fud to think about. That is going to do it for today's breakdown. Appreciate you listening as always. Until next time, be safe and take care of each other. Peace.