← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
News Block: Bitcoin Price Rebounding, Odds for Next "Big Print" Rise, DOJ Seizes 127K Bitcoin from Pig-Butchering Scheme
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In this week's episode of the Coin Stories News Block powered exclusively by Ledn, we cover these major headlines related to Bitcoin, macroeconomics, and global finance: Bitcoin recovers from historic crypto deleveraging event Liquidity pressures...
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Welcome to the Coinstories news block, powered exclusively by LEDN. I'm Natalie Brunel and in about 10 minutes or less I'll provide you with insightful updates on bitcoin, financial markets and the global economy. Everything you need to know in one block. Let's go. One week after the largest single day liquidation in crypto history, Bitcoin is still regaining its footing. Roughly $19 billion in leveraged positions were wiped out during the October 10th flash crash. A Dr. Drop turbocharged by heavy leverage, thin order books and a macro shock. Yes, it set a dollar record, but that's mostly because the market is so much bigger now. Galaxy estimates the Wipeout at about 0.45% of total crypto market cap. Only 5 basis points larger than the April 2021 deleveraging in percentage terms. We've been here before. Painful, yes. Systemic, no. This was a leverage flush, not a structural failure. Given how mature this industry is today, it seems like the market plumbing has absorbed much of it. This sentiment was echoed by Bitwise CIO Matt Hogan in his investment memo where he wrote, quote, the long term forces driving this market, improving regulation, increasing allocations from institutional investors, and a growing awareness of all the traditional markets that crypto is disrupting are still intact. Crypto may be a little jittery in the near term, but over time I expect the market will catch its breath and renew its attention on crypto's fundamentals. When that happens, I think the bull market will continue apace. I agree with Matt here. Compared with three, two or even one year ago, Bitcoin's tail risks are significantly lower. A few years back, investors worried about things like government bans and whether Wall street would ever touch it. Today we have ETFs, the clearest regulatory backdrop in years, and blue chip firms offering Bitcoin access. The fundamentals have never looked stronger. Pair that with market sentiment. The Crypto Fear and Greed index is currently sitting at extreme fear levels and it's hard not to view this as an attractive setup for investors to build long term positions. As Michael Saylor always says, volatility is a gift to the faithful. If it wasn't volatile, there would be much less opportunity. When you start to truly understand Bitcoin's value proposition as the scarcest, most censorship resistant asset in the world. In an age of increasing fiat currency debasement, then all of a sudden this short term volatility just becomes noise. The reality is that the odds of increasing currency debasement have never been higher. Given the $340 trillion in global debt. Bitcoin's price may be volatile, but it's more important to understand that part of that volatility is a function of the dollar's instability. Bitcoin itself doesn't change, it just keeps ticking along with the same protocol rules block after block as the fiat world fluctuates around it unpredictably and sometimes chaotically. As Bitcoiners say, one bitcoin equals one bitcoin. That mindset matters. In a world of ongoing currency debasement, your unit of account is as important the headline return. It's part of why hard assets have caught a bid this year. Investors are realizing that portfolios can rise in dollar terms yet fall when measured in gold or bitcoin. Gold's price took a breather on Friday, but social media feeds were full of images of long lines outside gold shops around the world, a clear sign of increased demand. I loved something that Neil Jacobs posted. He said people buy gold out of fear, they buy bitcoin out of hope. To me, people are waking up to the benefits of storing their wealth in hard money over fiat. When asked about gold's recent rally, Treasury Secretary Scott Bessant answered bluntly, more buyers than sellers. I guess it really is that simple. Sometimes need cash, but don't want to sell your Bitcoin. Ledn is the global leader in bitcoin backed loans, issuing over $9 billion in loans since 2018, and they were the first to offer proof of reserves. One with LEDEN, you get custody loans, no credit checks, no monthly payments and more. Visit Leden IO Natalie to learn more and get a quarter percentage point off your first loan. One possible explanation for why hard money has rallied this year is that markets are sniffing out another round of money printing right around the corner. Around the world, central banks have already been easing. According to Macro Micro, the most recent action taken by roughly 85% of central banks has a rate cut. This is a de facto coordinated push to add liquidity to the system and cushion slowing growth. But those cuts might not be enough. This past week, Fed chair Jerome Powell signaled that the central bank may stop shrinking its balance sheet in the coming months. Fed officials have been reducing the central bank's balance sheet since 2022 in a process known as quantitative tightening. The goal was to reverse the trillions of dollars in pandemic era asset purchases. But shocker, it looks like the balance sheet will not return to pre 2020 levels after all. If the Fed stops QT soon, the balance sheet will bottom out roughly 40% above its pre pandemic size. This is monetary inflation. And this is what so many of us predicted that they were never going to return to the pre pandemic balance sheet. Earlier this year, the Fed already slowed the pace by reducing the amount of bond holdings it lets roll off every month. Now officials are signaling they may stop runoff altogether. This would be an important shift in Fed policy because it indicates that they are concerned about liquidity conditions and are willing to abandon their balance sheet constraints and inflation goals to address it. But this pivot signals something even bigger. James Lavish summarized it well in his latest informationist newsletter when he wrote, quote, the Fed has basically backed itself into permanent qe. They can't shrink meaningfully without breaking the system, and they can't stay this big without stoking inflation. The Fed is between a rock and a hard place. We've said it before. Shrink the balance sheet to fight inflation and risk a liquidity crisis, or stay large to protect liquidity and risk stoking inflation. And the liquidity warning signs have been flashing the gap between the sofr. Sofr, the rate banks charge each other for overnight loans, and the federal funds rate. The short term rate set by the Federal Reserve has widened to its highest level in five years. This suggests banks are becoming less willing to lend to each other, signaling a liquidity squeeze in the system. When this happens, the Fed often has to step in with new money or other forms of stimulus to keep credit flowing. In addition, bank reserves have fallen to under $3 trillion and critically below around 10% of GDP. That 10% level is often cited by Fed officials as the lower bound of ample reserves where the financial system can function smoothly. Taken together, these readings point to tightening liquidity conditions. In other words, we're potentially getting closer to another round of money printing. I hear you, Larry Leopard, waiting for that big print. And historically that's been a great time to accumulate Bitcoin while it's still cheap. All right, switching gears to the government. This past week, the U.S. department of justice announced that it has seized around127,271 Bitcoin worth nearly $14 billion. This is scam operation tied to Prince Holding Group. These bitcoins are allegedly the product of a massive pig butchering scheme, an online fraud strategy where victims are groomed via fake romantic or investment offers and then persuaded to hand over their Bitcoin. I'll be doing an exclusive interview with a guest who specializes in tracking these pig butchering schemes very soon, so stay tuned now. The announcement was met with mixed responses in the bitcoin community. Some were uneasy about such a large Bitcoin hoard being scooped up by the government, and others argued that the Bitcoin should go directly to the scam victims. Managing partner at Reins llc, Zach Shapiro, clarified that this is exactly what responsible Bitcoin policy looks like, writing, quote, the seizure of $14 billion in Bitcoin from a criminal enterprise built on human trafficking and financial fraud is exactly the kind of outcome strategic Bitcoin reserve was designed to enable. Under Section 3D of the SBR Executive Order, any coins that can be traced to identifiable victims must first be returned to them. But for the remainder, which would otherwise sit idle or be liquidated, the SBR ensures that Bitcoin recovered from atrocities like pig butchering is preserved as a strategic national asset. This is what responsible Bitcoin policy looks. Defending victims, punishing abusers, and using justice to reinforce national resilience. So I think Zach makes a great point. The way that the strategic Bitcoin reserve is written, the Bitcoin will go from criminals to the government, who will then identify and return the funds to any victims. And for the bitcoins that can't be traced to victims, they will be held as a strategic reserve asset and prohibited from being sold. Now, of course, I understand why people would be skeptical, and I pray that the victims of these crimes get their precious sats returned to them. The sheer size of this single seizure shows how quickly a government's strategic reserve can grow, especially if it is mandated to never sell the Bitcoin so that the country can benefit from its appreciation. My only hope again, is that governments don't abuse this power, only seize Bitcoin from true criminal activity and make the best efforts possible to return Bitcoins to their rightful owners. In short, it's good that justice has been served. But with the strategic Bitcoin reserve in place, the question now really isn't whether government officials will hold Bitcoin, but what they'll do with it once it's in their vaults. Now, before we wrap up, a quick reminder to pre order my book, Bitcoin is for Everyone. It's already trending as the number one new release in money and monetary policy on Amazon. So thank you to all of you who have placed orders. The book is a simple, approachable introduction to Bitcoin for people of all ages and backgrounds. It explains the problem, our broken monetary system, and the solution, Bitcoin in a beginner friendly way. Just head to the link in the show notes and don't forget to subscribe to thenewsblock.substack.com for all the updates on the book, book events and more. That's it for the news block. Your weekly Bitcoin and economic news update. Powered exclusively by ledn. I'm Natalie Brunel. Make sure you're subscribed to Coin Story so you never miss an episode. This show is for educational purposes and should not be construed as investment advice. Until next time, keep stacking.