The Wolf Of All Streets - When Will Crypto Explode In The USA?

Starting point is 00:00:00 Very clear political lines are being drawn in the sand in the United States around crypto. Is that what it will take for crypto to explode again? Regime change? Could things actually change if we keep the same president and the same party in power? Could RFK even win? I have no idea, but it's very clear that crypto has become political. We're going to unpack that and everything else that happened in the news this week on the Friday Five. It's myself and NLW. Let's go.

Starting point is 00:00:44 What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we Let's go. probably should go and beat the next attempt. How are you doing today, man? Things are good. There's a storm here, but not so apocalyptic, it seems like. You had some big news this week. It's not one of our Friday Five, but the breakdown is getting some serious attention right now. Yeah, the breakdown is moving over into the Blockworks family. I've really wanted ever, especially since I sort of expanded and started to do the AI thing and super intelligent, I wanted the breakdown to have entrepreneurial energy behind it as well. You know, people who want to help grow it and think about new versions of it and expansion. And the Blockworks team is, I think, awesome for that. I've known them for a long time. You know, I think they're building something great. So

Starting point is 00:01:42 functionally, everything will be the same for listeners. The format's staying the same. I'm continuing to host, but crypto right now without talking about this wholesale acceptance from the Donald Trump campaign. Right. We've got Bitcoin could benefit from a Trump win and U.S. fiscal dominance from Standard Charter. Donald Trump says he'll accept crypto for campaign donations. But more importantly, a video I've showed here and I won't show again. He basically said, if you vote for Joe Biden, your crypto's dead. If you vote for Donald Trump, I'm going to let you guys do what you want here. It's a wild shift. I call this the completion of Trump's 180 on crypto. I think it was completely inevitable, right? I mean, it makes sense. It's more coherent in some ways with his previous positions than where he was at the end of the last administration. That's why I think people always felt when we got that sort of, you know, I'm no fan of Bitcoin, blah,

Starting point is 00:02:53 blah, blah, blah, blah. That tweet, one, felt like it was written by then Treasury Secretary Steve Mnuchin. This was all the way back in 2020 or whenever it was. But two, it also very clearly was not so much about Bitcoin and crypto, but about the US government's hatred of Mark Zuckerberg, right? This was prompted by Zuckerberg launching Libra and wanting it to be, you know, this sort of have an alternative currency to the US dollar. And we just got kind of swapped up in that dragnet. So it always felt a little out of place, perhaps, to regular sort of Republican politics. And over the last four years, we've obviously seen a little bit more of that

Starting point is 00:03:30 divide start to take place. Trump has been testing for the last few months this sort of language. He's been softening his stance in a very progressive way. He started talking about CBDCs in January and was explicitly surprised by what a big reaction it had. He kind of mentioned that he had no idea that it was such a big issue for people. Then I think a month later, he sort of started to say that, you know, he loved the almighty dollar the most, but you know, crypto was fine. There were a lot of people using it, you know? And, uh, and so this is sort of like, I think in some ways the natural, the natural evolution of that position. And, you know, the, the crypto industry was waiting with open arms after

Starting point is 00:04:05 what they've experienced with this current administration for the last few years. Yeah. I mean, I don't know if he means it, if it's speaking to his audience, if it's a tactic, but regardless of your thoughts on him or his beliefs, it's definitely smart if he's trying to woo crypto voters, right? And I'm not taking a political position at all, but it's a savvy move in the context of what was happening. We do have one of the videos here. It's about 25 seconds. So let me just play it really quick to give people some context. Biden doesn't even know what it is. If you ask Biden, sir, are you for or against crypto? What's that? Get me off the stage.

Starting point is 00:04:41 He's saying, get me off the stage. Now, he has no idea. But look, Gensler is very much against it. The Democrats are very much against it. And I say this, a lot of people are very much for it. Probably a lot of the people in this group. And I'm fine with it. I want to make sure it's good and solid and everything else. But I'm good with it.

Starting point is 00:05:02 And if you like crypto in any form, and it comes in a lot of different forms, if you're in favor of crypto, you better vote for Trump. Yeah, I mean, like I said, you can have your opinion on what his intentions are, but you can't have an opinion on what he said. Yeah, I mean, it is a crystal clear position. I actually think that just from a sheer

Starting point is 00:05:22 political analysis standpoint, he's sort of still hedging than making it, it would be weirder if he was all of a sudden pretending that he loved crypto. He's not really doing that. You know, he's sort of, he's saying, I'm cool with it. You guys like it. That's fine with me. I like free enterprise. You know, it's a much more sort of free enterprise and I want American entrepreneurship type of argument, which I think is, it's really tamping down on the easy just kind of playing us critique with some people, right? I think a lot of folks are rightly skeptical of any politician who starts to move into a particular space and shifts their opinion on it. And I actually think that it's sort of more resonant with some portion of the crypto

Starting point is 00:05:59 crowd, because it's not a full throated endorsement of the thing. It's a full throated endorsement that the thing should be allowed to exist regardless of what he thinks about it, which is kind of where everyone wants to be. Also a full-throated position that's the antithesis of the guy he's running against, which is probably effective. We have a few more political stories. We'll just talk through Bowdoin meme point surges after Trump quips about it. He literally had to answer a question about Bowdoin for those who missed it. He said, I don't like that investment, obviously. He wasn't aware of it. It was described to him and he quipped, but pretty funny. Elizabeth Warren calls for crackdown on crypto's role in child sex abuse.

Starting point is 00:06:38 I literally don't know what she can come up with next, but we can see where the line in the sand is drawn between the two parties and who's pushing it from each side. Most people cringe about crypto, but enough care to warrant politicians' attention. This is a survey of swing state voters shows that as many as 21% of them are serious about crypto policies, though more than two thirds of people distrust the digital assets movement. This is always what's curious to me about the anti-crypto army. You have passionate people who will vote on this issue solely because they love it, but nobody's going to vote solely on the anti-crypto agenda. They say they distrust it, but they're not going to vote based on somebody opposing it. It has always felt to me like this sort of, well, one, the anti-crypto army thing was a

Starting point is 00:07:26 very explicit decision. That was not a random errant comment from Warren that got a bunch of traction that just went off. That was a bunch of people sitting around in a room deciding that they were going to make this an issue, right? And then doubling down on it at various points throughout the last couple of years. My feeling has been that it was not even so much about crypto initially, it was crypto as the next generation of sleazy big business, which is a winning issue, particularly for the Elizabeth Warrens of the world. I think that that's, you know, you heard this in her hearing statements from a couple years ago, where it was, you know, you guys say you're about decentralization, but really, it's just the big money in a new form, right? That was her line over and over and over again.

Starting point is 00:08:08 I think that that's what she thought she was getting into with this. What they seriously underestimated was the extent to which this is a very discreet, specific lobby and community that punches way above its weight class is much louder, much more insane than anything they could have possibly imagined. And so now they're fighting a war that they didn't realize that they were going to have to fight. They thought they were just going to score some cheap points going after big business again. And that is not how it played out. Young, rich, and angry were not the people that they thought they were picking a fight with and giving no Fs to that end. And so you can see that everybody's pushing back here. Nobody seems to fear them anymore. And there's a huge war chest being gathered on all sides,

Starting point is 00:08:53 as you said, politically for donations, punching way above our weight, but also, you know, in response to all of these suits that have been coming up. We'll get to some of that later. The next topic. Now, it may seem like we're still just talking about the opposing views in politics, but this is very specific. House votes to erase SEC crypto policy while President Biden vows veto. This is staff accounting bulletin number 121. This is a really interesting story and very difficult for me to unpack, to be honest, because this seems like one of the things that the Biden administration would embrace because it would move crypto further into the hands of Wall Street, which is along the lines of what we've seen with the ETF. This is disallowing

Starting point is 00:09:35 the biggest custodians in the world from custodying crypto assets because they have to be listed as liabilities on the balance sheet. You would think that maybe they would want State Street and BNY Mellon to have control of custody of crypto, but in their scorched earth, they're just opposing anything that seems reasonable crypto, even if it ends up past bipartisan in both the House and the Senate. This was an insane, insane choice to make. I think it'll go down as a very bad political decision to have decided to die on this particular hill. So the super fast TLDR for people who haven't been paying attention, staff accounting bulletin 121, it was basically about crypto had to be put on the actual balance sheet, which one of the functions of that is that it's not bankruptcy remote, like it's not protected if a financial

Starting point is 00:10:23 institution goes to bankruptcy, which is obviously very much worse for investors than if they could custody it separately. Second, because of capital requirements, it just effectively meant that banks, as you said, Scott, couldn't be in the game, right? So it entirely cut off traditional regulated banking financial institutions from participating. Now, from the SEC standpoint, obviously, it's pretty clear what they want. They don't want crypto to be around. They effectively wanted to bulldoze it and block it from being integrated into sort of those traditional institutions, not because they want, they think that's best for investor protections, but because they want to do sort of this sort of soft ban that eventually kind of pushes it entirely offshore, right? Like, as we're screaming about it being this, all these policies pushing it offshore, that's exactly what these folks are hoping for. They don't want to deal with it in the US. Anyways, this all happened as part of this sort of staff accounting bulletin. But the it didn't go through a normal rulemaking process, right? It was just sort of announced, there was

Starting point is 00:11:18 no ability for industry to comment on it. And last year, the GAO said that that was illegal, that the way that they had done it was inappropriate. It was not the right process, that it did amount to rulemaking, and that it needed to be up for congressional review. That led to this bill, which was introduced by Representative Mike Flood, that basically overturned this on the basis of it being determined by the GAO to have been an illegal, incorrect process. And so what happened, interestingly, was that as this was coming up for a vote, Biden made the very, very unusual decision to preemptively vow a veto if this were to pass, which is a really dramatic action for any type of legislation, not just crypto. And even though their votes were not required to pass this, 21 House Democrats crossed the aisle to vote in favor of repealing this rule. And if you go through Twitter and look at a lot of them, it's not, again, it's not some sort of full-throated defense of crypto. It's a lot of really rational common sense takes. There's one congresswoman from Colorado, for example, who said, look, people are buying crypto. I want them to be as protected as they can be.

Starting point is 00:12:28 This doesn't accomplish that. It's an easy decision. And it's been a fascinating thing to see just how dumb this is playing out for Biden and the Democrats. Well, it looks like the internet is out again, so I will just keep going with this until Scott comes back. So two things that I think are interesting, and apologies for not being able to share this live. Obviously, in the wake of these Trump comments, there have been this large-scale conversation around whether crypto is now fully partisan, right? For a long time, it had this, it was resoundingly more bipartisan, at least than other areas. You know, still, I think it's pretty obvious that the sort of free market Republican point of view is a little bit less inherently

Starting point is 00:13:18 hostile to crypto. But there was broad divides or broad sort of, you know, differences here that made it not so clear cut. It's calcified a little bit over the last year. And I think that it's calcified in a way that pro-crypto Democrats and just pro-free enterprise Democrats have not really been excited about. And that really came to the fore, you know fore in the wake of these Trump comments and in the wake of this vote. Representative Wiley Nickel, for example, yesterday tweeted, we cannot hand this issue to the Republicans. Digital assets shouldn't be a partisan issue.

Starting point is 00:13:54 I'm going to continue working in a bipartisan way to support Web3 so that we can protect American consumers and keep blockchain and crypto innovation in the United States. Avichal from Electric Capital said something similar. He wrote, Biden does not equal Democrats. Crypto becoming partisan would be a very bad outcome. Given that 21 Democrats rejected SAB 121 yesterday from the SEC is a good opening for crypto. We just need to pry it open. We are at this inflection point moment where crypto is going to go one of two ways. It is going to either become incredibly partisan because the presumptive, you know, Republican nominee for president

Starting point is 00:14:32 decides to embrace it. And that really drives it in a particular direction. And one outcome of that could be that Democrats who loathe anything having to do with Trump just run in the other direction. However, I think it's fascinating that what we're actually seeing play out is that in spite of that, this group of Democrats are just trying to rip it back, to not see this issue. The sum total of all of this, when push comes to shove, is not about any one political party, but it is an answer to a question which has been on people's minds for some time, which is, how much is crypto actually a resident political issue when it comes to this election cycle? Will crypto actually make a difference with people voting? I think Scott had the right of it earlier when he said that pro-crypto people will vote their feelings on the basis of people's perspectives on crypto,

Starting point is 00:15:25 while anti-crypto people are unlikely to make decisions on that basis. And what is undisputable, I think at this point, or indisputable, is that crypto is now on the agenda as a political issue. It has been officially elevated by President Trump. This particular line in the sand drawn by Biden with his veto has significantly supercharged what people think about it. And it is now on the agenda in ways that are going to play out over the next few months before November. I think I will wrap it there. This is by far the most important thing that happened this week by an order of magnitude. And I'm not really sure actually what the rest of our top five were. But I think it's actually kind of reflective of the state of this week, that this is the big issue that everyone is talking about. This was the most significant event of this week. It's an event that we will remember for a long time in the same way that I can basically still tell you exactly when Trump sent that first Bitcoin tweet. Crypto is on the political agenda. It's in a big way. Oh, are you back?

Starting point is 00:16:25 I think so. All right. The internet apparently is working for the moment. So I don't know what I'm figuring. I op-ed for a while. So I think we pretty well summed up the political side of things. Awesome. Did you talk about Robinhood? No, I talked about nothing else. I was about to cut it off and say, who cares about everything else? This is the big issue for this week, which functionally is true, but we, you know, you're back. So we might as well get to some of the other, okay. Then we're going to do it real quick. We've got,

Starting point is 00:16:54 obviously Robin Hood receiving a Wells notice. Uh, interestingly, Vlad Tenev, you know, obviously laying out the case for why Robin Hood has done their best. We saw a story that Robinhood has met with the SEC in good faith 16 times. You guys might remember Robinhood is licensed to offer securities. They delisted everything that was passively named an unregistered security by the SEC and still having issues. Of course, their volume surged massively, so the company doing quite well. And I love these two stories. Robinhood would likely win crypto court case with the SEC, and then Robinhood is unlikely to win in a full-on battle with the SEC. Great.

Starting point is 00:17:36 This one, before all the Trump stuff, this one still had a similar effect of accelerating this battle within crypto or the perception of this battle, you know, it's, it's very clear that no one is beyond targeting at this point for the sec, that they're not just going to go after, you know, sort of really bad actors. It's their, their purview is everyone, which I think confirms something that you and I have talked about a lot in past shows, which is, it doesn't really seem like the goal is to win these cases.

Starting point is 00:18:02 It seems like it's to sow as much chaos as humanly possible in the short time in front of us. Yeah, I think that that's clearly the case. And there's nothing to dig into here. We'll see how many of these cases even exist if the politics change, right? Because none of them are going to be resolved in this next six months. Like you said, I think it's just napalm scorched earth. Anyone they can get a Wells notice in. We'll see if they even bring a case. We don't even know yet, right? The Wells notice is kind of the Justin Sun style announcement of an announcement. So I guess we'll see what happens there. Final story since I'm glitching here. Grayscale's application for Ethereum futures ETF withdrawn. Now we already had Ethereum futures ETFs approved long ago. So can you unpack why this became such a big story this week? Yeah, this one was weird to people because it was widely perceived that Grayscale had only filed this application so that the SEC

Starting point is 00:18:58 would deny it so that that Grayscale could take him back to court and basically replay the same case that they brought with the suit around the Bitcoin spot ETF. You'll remember that part of the big part, it seems, of the reason that we have a Bitcoin spot ETF right now is that Grayscale won this court battle where basically the judge said, like has to be treated as like, and there's no real basis for saying that a futures ETF is different than a spot ETF, at least based on the logic that the SEC had provided, which is that the market for a spot ETF was more manipulable. Basically, the price index is the same, which means that the manipulation capacity is the same. And so it just didn't hold water that that was the reason. So basically, the court didn't say you have to approve an ETF. What that court decision said was you can't deny these ETFs on the basis of that anymore. And so everyone thought that Grayscale was just

Starting point is 00:19:50 trying to run that back. So it was very weird when they withdrew this because usually the reason that you withdraw one of these things is that you've gotten word from the SEC that it's not going to go through. There's some things you need to change and they want you to, to change the filing date so you can get all your ducks in a row, but they're kind of, you know, it's often a sort of short-term, uh, short-term bad, long-term good type of a thing, because it means, you know, they're, it's going to be refiled with a better chance to be approved at some future date. This one, again, because they, we, we didn't think that they were actually trying to win or get approved, it's very weird.

Starting point is 00:20:26 And no one really knows exactly what the reason for it is. Yeah. If it had been withdrawing their application for an Ethereum spot ETF, I would have expected it to be huge news, right? Because maybe they would have known something. But the fact that it was a futures ETF where we already have those products approved. I mean, Grayscale's CEO, Michael Sonnenschein, basically said, we just want to focus on spot products. There's nothing here.

Starting point is 00:20:48 And by the way, if anyone looked, Ethereum futures products are really unpopular. Yeah. I mean, it's entirely possible that at least part of that is completely legitimate in the sense that, let's say that we were all right and they really were just doing this to fight that court battle. Grayscale has been bleeding like crazy.

Starting point is 00:21:11 They could have decided that they don't want to fight another court battle right now. Yeah, leave it up to someone with an Ethereum spot ETF filing to go fight the next battle. Shouldn't be Grayscale, especially if they know that they're not going to make that much money on the Ethereum spot ETF or features ETF, even if they get approved. Guys, that's all we got. My power is literally glitching again. So we're going to go. We will be back next Friday with the Friday five. Thank you, everybody. Thank you, NLW, man. See you soon. Later, guys. Let's go.

The Wolf Of All Streets - When Will Crypto Explode In The USA?

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.