The breakdown is sponsored by nydig and produced and distributed by coindesk whats, going on guys. It is friday, september 3rd, and today i wanted to do something that ive been thinking about for a while, and i feel like this is the perfect time. Labor day weekend is at least in the u.s, the historic end of summer, its when the last hurrahs, the last barbecues happen, and we transition into our pumpkin spice latte season, our spooky season, halloween season, the fall, the holidays, the leaves etc at moments of change, seasonal Change or market change its worth asking what came before and what comes next to explore, what we learned and to think about what we might come to see or expect to see going forward today. What i want to do is rip through a few different categories. In the bitcoin crypto and macro space and ask kind of where we are, what we learned over the summer and what we might expect or what the key questions at least are for the fall to come now on most shows. At this point, i work off a pretty in depth outline, but for this one i just had this idea, and i really just wanted to let it rip so if it sounds different or more freeform than normal thats. Why? I think the right place to start is the macro. What is the dominant macro context, thats going to shape the fall for the bitcoin industry in particular, to understand that? I think we have to first ask what was the story of the summer, and i think the summer story in macro was in fact a transition.

At the beginning of the summer, inflation numbers were heating up consumer demand. Consumer spending were surging, the delta variant wasnt. Yet a huge problem and the general belief, the operating framework for many in the market, was that the feds hand was going to be forced around tapering dovish monetary policy, support for the markets. That would mean an earlier than expected reduction of bond purchases and eventually an earlier than expected increase in interest rates. The way the market started to price this in was by selling off on tech and the high risk things that had been some of the biggest beneficiaries of that low interest rate environment that spilled over into bitcoin and crypto as well, which are obviously even farther out On the risk spectrum than things like arc etfs, however, over the course of the summer, the biggest thing that changed was the rise of the delta variant. It has created new questions about the return of economic strength, limited lockdowns, more mask mandates, just general disruptions to the way that people lived, and so it started as a recovery summer then turned into a maybe were gon na have to deal with this forever sort of Environment when it comes to the monetary policy discussion, this was really summed up by powell at jackson. Hole the annual jackson hole symposium, put on by the kansas city fed is where the fed likes to signal big shifts or changes, and up until a few weeks before this years august event, markets were expecting powell to confirm that it was time to start tapering or At least time to start thinking about tapering, as it got closer, though, as the kansas city fed had to move the event from in person to virtual that shifted, and instead what we got was a confirmation that dovishness is going to remain intact for some time.

So what that means going towards the fall is that were likely to see this low interest rate party and all of the attendant consequences for risk assets continue, at least through the end of the year. If that changes, it could have a pretty dramatic impact, though on bitcoin in the crypto scene as a whole. Still, i think its worth even maybe zooming out even farther here by bringing in travis kling from ikeyguy. He shared a chart of the increase in central bank balance sheets and wrote this at risk of sounding hyperbolic. This is the only chart that matters most everything else flows from this, not least of which is crypto and bitcoin. Specifically, you can think about what your expectations for crypto would have been three years ago. If you knew the above chart was going to be flat for three years, and you can think about what your expectations for crypto would have been. If you knew that chart was going to do what it just did go from 20 trillion to 30 trillion. Those would be two different sets of expectations. I would argue: total crypto market cap going up 1.7 trillion, while central bank balance sheets went up 10 trillion does not strike me as overvalued. The bitcoin market cap went from 125 billion to 900 billion in three years, while central bank balance sheets increased 10 trillion. That really doesnt strike me as overvalued. If you think that chart above had been so important these last few years, youd find it worthwhile to think about the outlook for central bank balance sheet expansion.

Expansion is set to continue for a while longer, but at a slower pace than what we just witnessed. They might even try and turn it off altogether for a bit that might give some investors pause about the outlook for crypto and other risk assets in a vacuum. But at this stage it matters what fiscal policy is doing, along with monetary policy. Monetary policy is set to pick up meaningfully, even by conservative estimates. So when you look out over the next three years and the three years after that and after that, in the context of the three years, we just had its reasonable to believe crypto and risk assets broadly will have similar tailwinds to the tailwinds. Theyve had its true that central banks may very well taper asset purchases, all the way to zero. They may even get a few rate hikes in from zero or negative interest rates currently, but both of those will be short, lived, a couple quarters or a year or maybe 18 months, then the cuts will come and then more qe and that qe will be bigger Than ever and more exotic than ever by the time we get to the 2024 bitcoin having theres a good chance that printing presses will be burring faster than ever next up on our official breakdown fall preview lets talk about regulation. The obvious next thing here will be congresss passing or not the infrastructure bill, and it looks like thats going to happen.

The vote is slated for the end of this month. The end of september, behind the scenes, as weve learned over the last few days, the treasury department is trying to write even more rules into the crypto tax reporting requirements than we had previously been fighting against. It feels to me watching that happen that they believe this is their one shot to ram things through without the sort of fight that they now know were capable of. Of course, many of our allies in congress and the senate are dead, set on trying to find other ways. Other legislative means to try to challenge those broad definitions of a broker to challenge the constitutionality, even of some of their requests for information. The onus of reporting that they want to put on different actors in this ecosystem were starting the fall effectively. I believe, with both a recent win and a recent loss. The win is that we showed we have power and we started to learn how to organize better. The loss is that, ultimately, it didnt change the actual infrastructure bill which could cause serious headaches going forward on top of the infrastructure bill. Specifically, we may see more discussion around don beyers comprehensive crypto legislation that was introduced during the whole hullabaloo around the infrastructure bill, and so we really havent had a chance to dig in yet. The notable thing to me was the amount of power it gave. The treasury department, over stable coin issuance stable coin approval stable coin vetoes candidly.

I will be shocked if we dont find out that treasury had its hands all over that bill. As congressman tom emmer speculated in an interview with coindesk a few weeks ago. I think its telling, in terms of showing their concerns around stable coins, and it is likely stable coins that will be a big part of the regulatory discussion. This fall on top of these things, two other aspects of the regulatory sphere that im watching one. I think exchanges are going to continue to try to race for transparency, for inclusion for basically being good actors in the system. Thats clearly already happening, and i dont see any likelihood of that changing. I think this is an immensely positive thing. Basically, trying to self regulate ourselves faster than we have onerous regulations come from outside, be good stewards, be good actors actually build relationships with these regulators. I am pro all of this when it comes to these institutions that have set out to be a new generation of centralized financial services thats different than the question of d5, which is the second thing that i think im watching this fall, which is questions of defy One of the things that the infrastructure bill process revealed was just how much treasury in particular is scared of defy doesnt like defy doesnt like the idea of a system that they cant control and surveil. Just today, before i started recording this show we found out that uniswap is being investigated by federal regulators.

It feels to me clear that there are going to be immense, immense battles around decentralized financial infrastructure. What rights we have to exchange peer to peer, what reporting requirements? Those protocols have, can you actually force reporting requirements on a protocol? Can you make protocol development illegal? There are finance issues here. There are securities issues, there are speech issues, there are code issues, its going to be complex, its going to be messy and the sides are starting to take shape. I think, if anything gives me hope from a regulatory standpoint its that it has not calcified into a partisan issue on both sides of the infrastructure bill were democrats and republicans vehemently fighting with each other against themselves to push through what they believed was the correct policy That gives us incredible hope that we can actually have substantive issues rather than crypto just falling into the same patterns of everything else. That seems to happen in the u.s political system. Music. This podcast is sponsored by nydig a firm thats, making bitcoin accessible to banking customers on main street and wall street alike as part of their mission to bring bitcoin to the people find out more at nydig.com nlw thats nydig forward, slash nlw Music lets talk bitcoin for A minute on a macro perspective, i think all eyes are going to be on el salvador. You can already see it happening this week, weve seen protests in el salvador, which i think the best characterization that ive seen so far.

Is that theyre a little bit less about bitcoin and a little bit more about naibukele in general? That doesnt mean we shouldnt take them seriously. I think it would be to our detriment as a bitcoiner community, to not listen to dissenting voices in a place thats going to be the worlds greatest experiment in bitcoin adoption, bitcoin adoption mandated from the top el salvadors laws are set to go into effect next week. So well see a lot more about how they will enforce them, what they will do to support the community transitioning to bitcoin and so on and so forth. I think more eyes from other governments will be on that experiment than we might think and itll be important to see how it plays out. Itll also be important to see how much the narrative around it good or bad, gets put on. Bitcoin versus the government of el salvador itself, another thing im watching this fall with bitcoin is continued institutional involvement and in many ways i think, im transitioning my view from not just the announcement of these new bitcoin trading capacities or bitcoin offerings, but to what extent they Actually come to market weve had now a full year of announcements about institutional investors and funds getting into bitcoin starting to allocate, and i think that well start to see this fall the products of some of those early announcements on a retail side. Related to that. One of the things that companies like breakdown sponsor nydig have been doing is trying to make it easier for banks and credit unions to allow their customers to hold, buy and sell bitcoin directly from within their accounts.

Will those partnerships actually go online and will that have an effect of enabling more people to come in? Second, on the retail front, i think we have to keep an eye on price fomo. At the end of the day, the thing that drives the most new people to bitcoin is when bitcoins number is going up and capturing everyones attention. Ngu technology from an adoption standpoint is the true technology of this entire space and im wondering what the mixture of things like those account integrations of being able to buy and sell bitcoin from your local federal credit union with any potential price fomo. If bitcoin does make a run of it now lets talk nfts from the standpoint of retail adoption from consumer adoption and from energy and media attention in the crypto space itself. I think its pretty clear at this point that nfts are set to dominate the fall. One of the things that i believe is happening now is the start of some amount of segmentation in our understanding of nfts such that we can perhaps start to understand whats trending, whats, finding product market fit and whats likely to stick around versus lumping all nfts together. I think there are at least three verticals that matter right now and have a potential impact. There is the art and generative ai type vertical, that is the crypto punx that is fidenzas, that is art blocks, that is board apes. This is what has been driving the last couple months of insane.

Nft activity is getting into those things: steph, curry, buying an ape visa buying a punk, et cetera, et cetera, et cetera, thats. Clearly, an important thing, although at this point im not sure that its actually going to attract retail, it feels almost entirely a flex game inside the crypto industry, which doesnt make it less sustainable. To me. In fact, it means its potentially less likely to crater around the problems that happen. When you invite the whole world in another, vertical is sports and collectibles. Obviously, nba top shot was one of the breakouts of last fall. It was the thing that really got people paying attention to nfts again when basketball season comes back online, when other leagues announce their own approaches. Will this actually be a thing that translates or will nba top shot have been a flash in the pan, based on how many people who werent crypto people who got in, i think you can have at least reasonable optimism that there is a there there with sports And collectible nfts, but i still think its not proven enough for us to be sure the new one that is capturing everyones attention right now is gaming, or maybe we might call it. The metaverse whats been happening with loot this week shows that there are totally new unexplored possibilities around when you put digitally scarce, unique objects into an ecosystem into a thriving community and say go create. It deserves a show of its own, but im nearly positive that this fall were going to see a ton of experiments around that space.

So what are my questions here? Well, one is: will these insane prices sustain, and i think that has a lot to do with the crypto markets as a whole. These prices are being driven right now, not by a flood of new retail users getting into nfts but by people within crypto, particularly defy shifting their attention to nfts relatedly. Will those prices will these incredibly high price floors actually create blockers to new people coming in? Will nfts either on the art side or the gaming side or the sports collectible side be a mainstreaming force? Will the people who onboard into quote unquote crypto this fall mostly be coming through nfts? What impact will nfts have on d5? It feels to me like right now, a lot of the defy energy is shifting into nfts or maybe looking for overlaps with nfts. Will that continue and what will it mean? And finally, what impact will nfts have on layer 1 battles? Eths gas fees are so high right now because of the activity around nfts were clearly seeing thats a boon to solana, which is much faster and cheaper. But if you ask the ethereum community not sufficiently decentralized, it feels pretty clear that the nft cycle is going to have a deterministic impact on how we think about layer. One finally lets close with a quick thought on cbdcs ive thought for a while that china would, before the end of 2021, try to have their full scale.

Cbdc launch theyve certainly been doing enough trials and tests that that doesnt seem unreasonable. But im now wondering if this fall will see something thats more like an announcement for and a target date for a full roll out or the beginning of a rollout that starts early 2022.. Europe started the year with a lot more discussion of cbdcs than weve. Seen then, however, the whole point for them was starting a review period, a discussion period, a research period, so theyre kind of just in the thick of things. Right now, i think theres, nothing that ive seen that makes me think any less that theyre headed in that direction, but its not something that weve seen. For example, christine lagarde talk about as frequently and then of course, theres. The u.s cbtcs are a frequent topic of conversation more connected to the stablecoin discussion recently, and i think in many ways what i expect out of the us is exactly that that the stablecoin discussion, the cbdc discussion and the regulation of crypto discussion are going to actually Get smooshed into one real thing: thats sort of the genesis for my belief, my prediction that well see at least some number of politicians in dc advocate for the u.s to integrate the existing usd stablecoin system as the basis for a digital dollar, so that we do An end run around china effectively, but at the end of the day, this is all speculation. Hopefully, though, its been a fun way to look at what weve gone through, what weve learned over the last couple months and what might be coming down next from my standpoint, ive had a great summer hanging out with you, but fall is my favorite season.

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