The Wolf Of All Streets - Market Crash? Here's Why Traders Are Betting On Bitcoin To Rally

Starting point is 00:00:00 Bitcoin continues to dip, now trading below $64,000, but that is not stopping options traders from taking huge bets on much higher prices by the end of this year and early 2025. We're going to talk about that, but of course, the most impactful news stories of this week, and there are quite a few. It's the Friday Five with NLW. Let's go let's go what is up everybody i'm scott melker also known as the wolf of all streets before we get started please subscribe to the channel and hit that like button. Man, I thought you might be wearing your Mercedes cap. So I threw on my McLaren cap to be competitive and then you let me down. Just switching it up. I never know which day. I was like, I could have flipped it and be like, I'm all crypto. Okay, X, go backwards. So many options. So many options. So yeah, man,

Starting point is 00:01:02 as I said in the intro, it's been an interesting week. Take a look at prices on CoinMarketCap. Not great. Bitcoin down 5% on seven days, 3.3%, 24 hours trading at $63,600. To me, this is still just slow summer shop, nothing new here, but it seems to get people really excited when you talk about the price still. This is so weird. Summers are always a little like this, where regardless of where we are in the cycle, the summer is the summer is the summer is the summer. But at the same time, I don't know about you, but this week has felt way more like a bear market shenanigan week than a bull market. We were like 15% off the highs or whatever we are, 20% off the highs. I mean, we'll get into all of it, but the level of absurdity of these stories, the scheming behind them, it looks like bear market boredom. So it's like, maybe we're so fragged in terms of how fast things move

Starting point is 00:02:07 that just a couple months of not going up is enough to scramble our brains. I can't imagine what two months more of this or three months more of this would do to this community. Like I said, it's kind of become Lord of the Flies. But listen, smart money is still making big bets here. This is kind of the title. Honorable mention before we get into the real news stories, but Bitcoin options market isn't buying BTC price weakness shows bias for 100K calls. This is from Darebit, and they're showing a ton of buying interest on these calls. Obviously, people betting on much higher price in the future for December through the beginning of 2025 at 90 to 100K, which aligns with the thinking of most people who zoom out

Starting point is 00:02:47 and actually take a look at what's happening, aligns with previous cycles. I think time-based capitulation is real and people are just bored, but I think that this is the smart approach still. It's great. We have markets to give us meaningful signal for the future when we're too lost in the muck of whatever's randomly going on. I think everyone has to kind of manage their own psychology as they deal with the crypto space. That is actually a meaningful skill set in this space that you can either develop or not. And I think zooming out to see not what people on Twitter are saying, but what people with actual money are doing is a pretty healthy way to get a different read on things. Yeah. You mean people with no skin in

Starting point is 00:03:31 the game offering opinions are not valuable for your future financial decisions that you're saying? Mostly just your future mental health, I think more than your financial decisions even. But your mental health is what impacts your financial decisions and bad ones in the end, if that makes sense. So let's dive into, I i think the first real story here and to me the biggest sec closes ethereum 2.0 investigation will not pursue ethereum enforcement action this i love this take sec drops ethereum investigation to avoid embarrassing court case There's kind of a lot to unpack here, actually. I think, first of all, once the Ethereum spot ETF was approved, the thirst for attacking consensus or anyone else for a securities offering probably died a drastic and rapid death.

Starting point is 00:04:19 But this is also one of those first cases that you and I kind of talked about, theoretically, where maybe some of these Wells notices that we saw would not actually see follow through for the first time. The threat to litigate or to sue or to bring charges backed off because of the political pressure at this point. So maybe it's more than just the Ethereum spot ETF. Yeah, it feels like certainly the spot. Well, it feels to me more like the spot ETF is a similar outcome. These are both outcomes of a larger phenomenon, which is that sort of political shift, right? They're not being political capital to make this fight. They're being less political capital to take on the industry in general. So I don't think that this

Starting point is 00:05:02 is because of the ETF. I think the ETF is because of the same thing that's causing this, basically. That makes a ton of sense. We still have pending suits, Wells notices, MetaMask. The Ethereum Foundation, I believe, maybe is separate from the one we have right here with consensus. But do you think that now we're just going to kind of see Gary Gensler back off and disappear slightly and get out of the spotlight in advance of this election? I think everyone agrees at this point that he's a political liability for those who have been paying attention. Yeah, a lot of the crypto legal core has gone to pains over the last 24 hours or whatever it's been

Starting point is 00:05:41 to be clear about what this is and isn't, or at least try to, you know, articulate that it's not quite as comprehensive as maybe it's being reported, that it still leaves certain things open. And even, you know, the folks who are cheering it most broadly still understand that it doesn't resolve questions of staking, right? Consensus talked about how they're going to keep, you know, fighting that fight. But I do think that it represents a withdrawal from Gensler, from the most aggressive part of his approach. I have no idea what conversations are going on in the background with his handlers and political allies, but it's very clear that there is some amount of capitulation. Yeah, I think we'll take any amount of capitulation at this point,

Starting point is 00:06:23 to be honest. Just this thawing gives me great hope for whatever happens in the next administration. Whoever it is, it's going to be a hell of a lot better than I would have imagined six months ago. Yep, agreed. I'll take politically unpopular, so do nothing as an approach for an administration if I can get it. Next story, obviously, MicroStrategy buys 786 million more in Bitcoin with note proceeds. You can see Saylor here. MicroStrategy has acquired an additional 11,931 Bitcoin for 786 million using proceeds from convertible notes and excess cash. Must be nice. For 65,883 per Bitcoin. What?

Starting point is 00:07:02 Oh, he's already underwater, guys. He's already underwater. What a terrible move. As of 6-20-24, MicroStrategy holds $226,331 Bitcoin, acquired for $8.33 billion, an average price of $36,798. I'm old enough to remember when we knew for a fact that MicroStrategy was going to get liquidated, that Michael Saylor was going to be homeless. This was the worst bet ever. If he went below $25,000, it was all over. And here we are in profit over $6 billion. But man, the real story here is that this was supposed to be a $500

Starting point is 00:07:35 million convertible note. We somehow arrived at a $786 million buy. I mean, there is a truism now that's been true for a while. Basically, it's been true since August of 2021 or whenever it was. August 2020, I guess, when Saylor first bought in. That if you sell your Bitcoin, Michael Saylor will buy it. Full stop. And that's the kind of consideration that you always have to have if you're about to sell. I mean, listen, this is the most simple playbook that maybe we've ever seen in the history of business. The simplicity to success ratio is off the charts. Even haters have to back off and respect,

Starting point is 00:08:15 I think, at this point. Yeah, they have to go, what the hell am I doing working so hard to build a business when you could just buy a bunch of Bitcoin with all the money? It's really incredible. I think he will go down as one of the most brilliant investors in history, just simply because of his conviction and strategy. And every time Bitcoin goes higher, his risk for raising these notes in debt gets lower. I was talking about this on Spaces yesterday, but I do wonder what the conversations were in the boardroom, as this is still a publicly traded company, when Bitcoin was $20,000 and $18,000 and $17,000 and they were showing this massive paper loss. You got to think that they spent some amount of time, if not a lot of time, modeling this out based on past patterns and what their expectations were. But still, even if you, I mean, you and I have experienced this, everyone watching this, I'm sure has experienced this.

Starting point is 00:09:10 It doesn't matter how much you prepare yourself for the inevitability of a bear market and the inevitability of it coming back. It's all about the white knuckling it during the bottom when it hurts, but you know, he was, he still bought through the whole thing. So he had a strategy, he played it out and continues to play it out. Absolutely astounding. 38,000 cost basis. I mean, he's done exceptionally well even adding at these levels up here. Love to see it. I think everybody at this point is cheering him on. Next one, Stablecoin issuers. Now 18th largest holder of US debt. Stablecoin issuers are fast emerging as a significant source of demand for the US Treasury notes as concerns about

Starting point is 00:09:51 Washington's debt management grow. I mean, we're talking about bigger than most countries. Shouldn't the United States government be widely embracing stablecoins at this point, helping them to grow because they are helping hyper-dollarization and helping to sustain this massive debt load that we have? That conversation is finally starting to happen. I mean, we've been having it over here for years, but it's starting to enter the mainstream. House Speaker Paul Ryan recently wrote an op-ed about exactly this. And it just, I think, seems obvious to a lot of us that for a variety of reasons, if you are the US political establishment I think that the bigger thing to me is right now, there are competing factors for where the dollar stands in the world. On the one hand, you do have more questions as the dollar has become more politicized and particularly around sanctions in Russia was a sort of a big moment for some people. But at the same time, you still have a multi-generational legacy of the dollar being the most useful in demand currency basically

Starting point is 00:11:10 everywhere in the world, right? If you have a $20 bill, you can pretty much turn that into whatever currency you need to almost anywhere, right? And that remains the case. And there are a whole lot more people who are practical than ideological in the world. And what stable coins represent to them is of extending dollar hegemony into another generation who's just going to stick with the practical thing rather than worrying too much about ideological concerns about whether the dollar gets too political. And they're just going to supercharge that. So I mean, it's just hard to understand any position from the US establishment perspective that isn't just extraordinarily

Starting point is 00:12:05 enthusiastic about stable coins. Of course, who's issuing those stable coins, how they work? Sure, there's more conversations to be had there, but the fact of their existence is an obviously net positive thing for the dollar. Jeremy Allaire, the CEO of Circle, had some pretty wild prediction as to how big stable coins could become over the next 10 years. He's saying 10% of money in the next decade or so. That doesn't sound so insane when you read it, but when you start to dig into the actual numbers, which they put down below, you've got an $80 trillion money market entirely. So we have $162 billion stable coin market right now. Basically he's saying 10% is going from $162 billion to $8 trillion, assuming no growth, which we know that there will be growth in that market.

Starting point is 00:12:52 So that's basically a compounded annual growth rate of 47.7%, though the estimate doesn't factor in the growth of the $80 trillion money market. I think this is totally possible, by the way. Yeah, I think it might. The question is timescale, right? I think it's probably an under guess when it comes to the ultimate place of stable coins across the whole system. It's just a matter of how fast it happens. I would say the other major factor, of course, is whether we see a proliferation of central bank digital currencies

Starting point is 00:13:25 that are not considered stable coins and compete with this, right? If all of a sudden we get a Fed dollar that's digital and are forced to use, which I don't think is happening, by the way, obviously, or the United States bans Tether or any of these stable coins, this could change. But I think in the current environment, all things equal, bigger than 10% one day. People are just not going, it's going to be bigger, especially when you consider, as he said here, it's not only how popular they are, how much people are using them, the foreign, the upside for someone in Argentina or Venezuela to be able to get dollars and send 10 bucks to a friend. It's also the fact that this could be the underlying technology for the existing payment companies. PayPal has a stable point. This could be how

Starting point is 00:14:10 Visa and MasterCard and banks settle. If that happens, it's way bigger than 10%. Yeah. I just think it's likely to be the most in-demand currency for a generation that's young right now, currency format, let's say. So the longer that it goes without there being credible central bank digital currency alternatives, the less likely they are. I think that it's one of those things where it's just going to evolve so quickly that private stable coins will basically crowd that space out. Yeah, de facto central bank digital currency. A lot of people have pointed at Circle because they sort of have the stamp of the United States government as potentially being that in the future anyways.

Starting point is 00:14:55 It will be interesting to see. This next story is absolutely wild, and I'm going to need you to unpack it for me. Certix says it found Kraken's bug and is transferring the funds back to the exchange. I followed this sort of superficially, but man, this is wild. So we have something between a overzealous white hat and a much more nefarious action. So long story short, there was a vulnerability found in Kraken that allowed people to effectively inflate their balances and withdraw them before the actual ledger was settled. And so Kraken has a pretty clear bounty program. And one of the two rules of that bounty program is don't exploit more than you need to, to prove the point

Starting point is 00:15:46 basically. Uh, and you know, $5 of exploitation would have proven the point in this case, right? It doesn't take a lot to do it. Certech walked away with 3 million or at the time had something like 3 million and they just kept hammering this bug over and over and over again, not mentioning it to anyone until finally, you know, days later after Kraken started talking about it publicly, owning up and saying they're the company and basically trying to, you know, claim credit as the good guys for this. And, you know, it has just been a wild, I mean, I would say that the average reaction of crypto security researchers, people who deal with this type of issue in general, not just at Kraken, has been gobsmacked as the standard response.

Starting point is 00:16:36 And I think at this point, Certek has sent back the majority of the money. There's still some questions around exactly how much it was. They were accusing Kraken of basically asking for more. They're basically ripping on Kraken security practices. But then to add a whole different dimension to this, it seems like that Certek sent part of this to Tornado Cash to mix it. People are like, one, the pattern follows North Korean hacking that we've seen before. Two, even if there's nothing involved with that, the fact that an American or a nominally American company is interacting with a sanctioned protocol, it's just the whole thing is very, very strange. It doesn't really make any sense. I think that the number one thing that Certek has going for them in terms of their version of the story being accurate is the lunacy

Starting point is 00:17:30 of behaving the way that they have. Actually only trying to get away with $3 million just seems nuts, it doesn't seem like a big enough prize if this was actually intentional versus just a set of compounding errors matched with unbelievably bad public relations. Yeah, but according to Nick Pococco, who is the head of security at Kraken, and I've had him on the podcast, he's a really great guy. He basically said, as you said, they could have just withdrawn four bucks, great. But the person who did it told two other individuals who may or may not be involved with Certik. And that's how they ended up with over $3 million out. And from what I read, Certik was basically like, we could have taken

Starting point is 00:18:13 hundreds, so you owe us this three. Yeah, yeah, pretty much. It was effectively extortion. Yeah. So I mean, I don't really get it. I'm glad they found it, though. And I think it's a net positive for the space, obviously, to have white hat hackers. But Certik is not some dude on a couch looking for a bounty, right? This is the company that people go to vet and confirm that their smart contracts are safe. I mean, this is one of the biggest auditing companies of smart contracts in the space. There's like a big company extorting them for a lot of money when he could have called the guy on the phone and said, hey, you've got a problem, a million bucks, settle it.

Starting point is 00:18:53 Yeah. On the one hand, you could argue that the most charitable explanation for this is that it's already a weird space in some ways to have such a robust white hat hacker sort of a system within a financial environment. I mean, it's different than the traditional financial sector, obviously. And so perhaps some amount of those norms are not sufficiently established where one could reasonably think, or at least arguably reasonably think that this is a reasonable set of behaviors. The flip side is when everyone in the world says, yeah, that's a little messed up. You could have just called them.

Starting point is 00:19:27 You're probably not in the right. So I don't know, man. It's a wild moment. I can't really see how this does anything for Certik except just absolutely completely undermine anyone's willingness to work with them in the future. Doesn't seem much for Kraken either or for the nonstop, we get breaks, but there's always fun about centralized exchanges and centralized platforms in crypto. The good news is, as I look into it, doesn't seem like this would have put customer funds at risk in any way.

Starting point is 00:19:56 I guess unless they took so much that Kraken literally to be able to do with the withdrawal would have had to dip into them. But this seems like an attack on Kraken, not an attack on Kraken customers. And I'm assuming a billion dollar withdrawal might have raised some red flags. Yeah. I mean, listen, unfortunately for Kraken though, I don't think that that particularly matters when it comes to how it's going to impact people's opinion. Because the question, if you're dealing with a centralized exchange, is, is their security up to snuff or are there going to be vulnerabilities? The fact that this vulnerability happened not to interact with customers doesn't necessarily make people feel all that better about their capacity to not have vulnerabilities that interact with customers. So it's still a rough situation,

Starting point is 00:20:39 but it's also very difficult. I mean, there's a reason that everyone constantly warns about centralized exchanges and understanding the risks that it takes to be interacting with a centralized actor. That's why we have hardware wallets. That's why we have, you know, an entire self-custody establishment. And each of these sort of moments is a reminder, you know, to consider that as you think about where you keep your crypto. Yeah, it's such a chicken and egg problem, because it's almost impossible for an exchange to protect against something they don't know about yet. So you need the white hat hackers to expose those things, but incentivize black hat hackers to always be ahead of the exchanges and security. It's a never ending evolution of potential pain. Absolutely. All right. This is the final story. And yet another one that's so kind of off my radar, but I've had to talk about it multiple times. Pharma bro, Martin Shkreli-Clay, he co-created the DJT token, according to Zach XBT. But there's a hell of a lot

Starting point is 00:21:39 more to this story because he was claiming initially that he had nothing to do with it and was just kind of out there promoting it and doing Twitter spaces. And people thought that this was the Trump campaign themselves. Ben Shkreli said he was doing it with Barron Trump, which people had had conjecture towards in the first place. And then the Trump campaign said, no way his son is involved. And I think Shkreli then said, I have hundreds of communications with him proving it. Meme coins, political meme coins, good times for the crypto space. Very, very good for the optics, I would say. Yeah.

Starting point is 00:22:10 I mean, I think this is worth mentioning mostly in the sense of if you're doing the meta analysis of the moment that we're experiencing right now and how future generations might look back at this particular cycle, it kind of has it all, right? It's a meme coin story that involves the politician that's most putting crypto on the map as a political issue. And so from that standpoint alone, that's why I started paying attention. If this had been the Trump campaign, it would have been a notable story. As it's played out, it's a lot of personal things and weirdness and stuff. Basically, my interest in the story has progressively declined because it's gotten less and less about the industry as a whole and more about a particular set of personalities

Starting point is 00:22:52 and how they're interacting. But I do think it's telling in the sense of, one, the centrality of meme coins as a central part of this ecosystem this time around. And two, just how much focus there is. I mean, incredible laser focus on the politics of crypto and Trump in particular. Yeah. I mean, is it worth discussing those politics any further before we go since it's our last story? I mean, we have the Winklevii each giving a million dollars to the Trump

Starting point is 00:23:23 presidential campaign. This is kind of like the first big one I think we've seen where someone's made a decision, said this is the guy and is rolling forward. Trump obviously is capturing the hearts and minds of most of the crypto industry as a whole. We know that a lot of the big names are weaseling their way in to advise, hoping they get a seat at the table is the way that I would describe it, to be quite honest, but that's fine. And a lot of them were very pro-RFK before Donald Trump started talking about this. But are we really going to be that big a part of the upcoming election? Or is this a moment in time where they're trying to capture votes a few months ahead, an opportunity that Trump saw to really grab this audience?

Starting point is 00:24:05 My instinct is not that we're likely to totally fall off the radar. However, I do think that in some ways, crypto is always a leading indicator. And crypto became a first push into respectability in a tech sector that had previously been super left-leaning in general, right? Alongside this whole crypto push, Trump showed up at a fundraiser at David Sachs' house. He was just on the All In podcast this week, which is all anyone is talking about. A lot of those folks were previously super anti-Trump. Sachs obviously not, but some of the others. Trump came out very aggressively for extremely pro-innovation or immigration policy around if people complete college, they should get a green card as part of their degree. And so to some extent, it feels to me like

Starting point is 00:24:59 crypto was leading a potential broader shift or experiment as he went after this particular audience. Once consolidated, you know, inevitably, he's going to have to go deal with other issues, right? There's going to be other things that catch up. It feels very unlikely to me that there's as much focus on this side of his policy platform for very long. But, you know, we'll see. Yeah, it seems like he got exactly what he wanted from this moment in time. It won't be forgotten. Biden, even though Pantera saying that Biden is trying to woo the crypto industry and come back, he's hesitant to go against Gensler, but he is really becoming pro crypto.

Starting point is 00:25:37 Probably too little too late because he can't fight the Trump bluster. Can't do it. The good news, I think, again, not to be relentlessly optimistic all the time, is what this is inciting is the tech establishment in both crypto and regular technology outside of crypto having to articulate why they are pro-progressive, pro-left, pro-democrat. And I think that in general,

Starting point is 00:26:04 it is always a healthy thing to have moments where default assumptions are questioned. People have to regroup around their core beliefs. And even if they come out in the exact same spot, the re-articulation matters, right? Reid Hoffman is all over every network that he has access to now explaining why he believes that a stable Democrat administration under Biden is going to be better for business than Trump. And again, it doesn't matter if you buy that or not. Six weeks ago, big tech didn't feel like they had to justify any of their opinions about a political leader.

Starting point is 00:26:34 And everyone should always have to be reconsidering and justifying their opinions. So it has kicked up a sandstorm that ultimately, however it falls, I think is net better for having happened. But I don't think that it's probably likely to be quite as sandy over on our side of the world for as much as it's been recently. I agree. At the very least, it's going to give us a hell of a lot to talk about for the next five or six months. Truly. No dearth of Friday fives here. Yeah.

Starting point is 00:27:03 All right, guys. That's all we got for you today. What a week. What a week. I, you know, I kind of laugh like prices are how they are and people are depressed, but I think when you zoom out and read the news, it's almost nothing but tailwinds.

Starting point is 00:27:14 It's like people forget the days even a year ago when it was all aggression from the government, from the sec, they forget the days of us boiling the oceans and making lakes as hot as hot tubs and uh you know political tool i think that uh if you zoom out man this is as good as it could possibly be on june 21st of 2024 concur concur harley all right guys follow nlw of course on x and check out the breakdown because he does this but even better by

Starting point is 00:27:47 himself every single day thanks man next time wear your mercedes hat deal later let's go

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The Wolf Of All Streets - Market Crash? Here's Why Traders Are Betting On Bitcoin To Rally

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