← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
News Block: Fed Cuts & Pauses QT, Bitcoin's IPO Moment, Strategy Gets Rated
00:11:28
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Welcome to the Coinsories 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.
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As expected, the Fed cut rates by another 25 basis points last week, marking its second cut of the year. On top of that, it announced that quantitative tightening, or qt, will end at the end of November. Now, quick refresher. QT is the process of the Fed shrinking its balance sheet, the same balance sheet that more than doubled during the response to the pandemic. Since 2022, the Fed has been letting bonds and mortgage backed securities mature and roll off its balance sheet. Now, starting in December, instead of letting securities simply roll off, the Fed will reinvest the cash from maturing securities into treasury bills. Translation the Fed is about to become a new monthly buyer in the T bill market. There's already debate on X about whether this is money printing or a form of qe. Lyn Alden chimed in, writing quote, it's money printing. Whether it's QE or not is more semantics. Fed won't call it QE since it's not duration and it's not for economic stimulus. Bottom line, this policy pivot will add more liquidity to the system. And more liquidity is generally a tailwind for asset prices. But markets didn't love everything they heard in the Fed press conference. Chair Powell downplayed the odds of another cut in December, saying a further reject reduction is not a foregone conclusion. Far from it. Those words far from it spooked investors and stocks, gold and bitcoin fell on the headlines. Two dynamics matter here. First, the fiscal backdrop. US public debt just crossed $38 trillion for the first time in history last week. And whether the Fed says it out loud or not, it has what Luke Groen refers to as a shadow third mandate to keep the treasury market functioning and by extension help preserve the government's ability to finance itself without easier Fed policy. Over time, that gets harder to do. So the direction of travel still points toward more Fed accommodation. Eventually. The only question is around timing. Second, there's bitcoin. Today, many bitcoiners seem frustrated that bitcoin is only up around 15% year to date, while stocks and gold have rallied. Given the strong fundamentals, many people are asking themselves, why isn't bitcoin soaring with everything else? One compelling explanation came from Jordy Visser in a now viral newsletter that I highly recommend listeners check out. In it, Visser argues that the reason Bitcoin has been chopping sideways is that it's currently having its IPO moment. What does he mean by that? Well, Visser explains that in traditional markets, early backers take huge risks and if they're right, earn huge rewards. But eventually they want to realize their profits and diversify their holdings. I mean, life happens, right? Early investors might need to pay for college tuition or want to pay off the mortgage, start a business, or even maybe get a yacht. That's what an IPO provides those early investors into companies. It allows early believers to cash out, causes ownership to broaden, and the asset matures. As a result, Bitcoin never had a formal IPO because it isn't a company. But Visser argues that the economics still apply. For years, Bitcoin didn't have enough depth for big holders to sell without crashing the price. Bitcoin was simply too small. But today that's changed. ETFs bring a steady institutional bid, major companies hold Bitcoin on their balance sheets and even sovereign wealth funds are dipping in the market can now absorb real size and early OGs appear to be taking advantage on chain Data shows that older coins have been moving, indicating that long term holders have been selling. So how do these dynamics impact Bitcoin's price action? Well, it helps to look how stocks trade post ipo. The typically there is an initial surge, then the stock consolidates. This isn't because the business is failing, but because those early investors are selling over time while new investors accumulate on dips. The end result is a sideways grind that can drive people crazy even as fundamentals improve. Visser points to names like Amazon, Facebook and Google as prime examples of this pattern. They have been incredible long term investments for those who held since the ipo. But investors still had to endure a year or two of sideways action after listing as early holders sold. So if you've felt like Bitcoin has been just sitting there, it may just be the natural evolution and maturation of an asset that is winning. The good news is that after this process is complete, what will remain is a more distributed, more resilient holder base that sets Bitcoin up to graduate from a revolutionary experiment to a durable monetary asset. I just had the privilege of recording again with Preston Pysh and Lawrence Lepard. The interview is already being shared widely and for good reason. We covered a lot of these macroeconomic topics and much more, including an important segment on the threat of quantum to Bitcoin so make sure to give that interview a listen. Last week the Fed cut rates and announced it will start providing liquidity to the market by ending qt. And when you pair that with the unsustainable fiscal outlook and Bitcoin's ongoing ownership reshuffle, you get a market that may feel choppy near term, but is quietly building fuel underneath the surface. Debt again has now crossed $38 trillion, which is 38 trillion reasons to study Bitcoin need cash, but don't want to sell your Bitcoin? Leden 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. With ledn, you get custody loans, no credit checks, no monthly payments and more. Visit LEDN IO Natalie to learn more and get a quarter percentage point off your first loan. Yes, Bitcoin's price will keep fluctuating, but the fundamentals really have never been better. We got a great reminder of how far this space has come with the 17th anniversary of the Bitcoin white paper. 17 years ago Satoshi published an idea and today it is a multitrillion dollar asset class. Every Halloween I'm filled with gratitude for the gifts Satoshi gave the world. And this year again, reflections poured in from across the globe. None bigger than from U.S. treasury Secretary Scott Bessant, who posted quote, 17 years after the white paper, the Bitcoin network is still operational and more resilient than ever. Bitcoin never shuts down. He's not wrong. Bitcoin's uptime since inception impressively sits at around 99.9%. And seeing a sitting treasury secretary publicly praise the network's resilience tells you just how far we've come. Bitcoin is now being appreciated by the most powerful policymakers in the world. And this year we've been watching sovereign nations, corporations and major financial institutions embrace Bitcoin. This past week, Japan officially became the 11th country globally to be using government resources to mine bitcoin. The news broke when bitcoin mining company Kanin announced it will deploy a 4.5 megawatt project to help a major Japanese regional utility company manage its power grid. Vaneck's Matthew Siegel pointed out that none of Japan's 10 regional utility companies are fully private, meaning all of them have partial government ownership. This makes this the first confirmed case of of a partially government owned Japanese utility using bitcoin mining to stabilize its grid, a major milestone for nation state adoption. And on the Wall street front, we just heard more Bitcoin comments from the heads of the largest US bank and the largest US Asset manager. JP Morgan's Jamie Dimon, a long time crypto critic, was asked on a panel if he's still a skeptic, to which he responded, quote, crypto is real. It will be used by all of us. Major banks will use it to facilitate better transactions. Okay, so he didn't say Bitcoin, but it seems like his views are evolving. And we also heard from another former critic, BlackRock's Larry Fink. When speaking on the same panel as diamond this past week, Fink added that investors should own Bitcoin if they're, quote, frightened if countries are going to continue to debase their currencies, which is in my opinion, a certainty. When the CEOs of two of the world's most influential financial institutions are speaking positively about the asset class, you know the tides have officially shifted. And here's another signpost. In response to a question I posed after Strategy's Q3 earnings presentation last week, Michael Saylor revealed that they are, quote, hearing rumors that major banks in the US Will start to buy Bitcoin, custody Bitcoin and issue credit against the native Bitcoin asset in the first half of 2026. It takes time for large institutions to build products and services around a new asset class. But make no mistake, the momentum is clear. And speaking of Strategy and another industry milestone, it became the first issuer of Bitco backed credit to receive a credit rating from a major ratings agency. S and P Global assigned Strategy a B minus along with a stable outlook. Okay, so although some people weren't too happy with the rating itself, the fact that a Bitcoin treasury company received a rating at all is a major milestone for the industry. On the earnings call, Strategy said a credit rating by itself unlocks access to roughly $5 trillion of institutional capital for its credit instruments. And S and P Global's rationale for strategies junk rating shows just how early we still are and how much education needs to be done. One of the more shocking aspects of the report was that S and P Global is treating Bitcoin like it's essentially worth nothing. In its model, the agency subtracts 100% of a company's BTC holdings from equity, which makes Strategy's equity look negative and pulls the rating down even if its balance sheet is very, very strong. Why? Because S and P Global thinks Bitcoin is risky and is basically assuming in their model that Strategy's Bitcoin holdings can go to zero tomorrow. Instead of acting like Bitcoin strengthens Strategy's financial position, the agency's model is acting like Bitcoin hurts it. The report writes, quote the company's concentration in Bitcoin is key to its strategy and will likely continue to weigh on our ratings. And adds the strategy also creates an inherent currency mismatch. The company has a long Bitcoin position and and a short US Dollar position. Well, exactly. Nailed it. Strategy is intentionally holding a scarce appreciating reserve asset rather than sitting in fiat, which loses purchasing power over time. That should be rewarded, not punished. Being long Bitcoin short dollars sits at the core of Strategy's entire business model, and that's why it's been so successful. This is what early looks like. Rating frameworks will take time to catch up to how to model Bitcoin on corporate balance sheets, but the that won't stop other companies from following Strategy's lead. From banks leaning in to corporations accumulating to ratings, doors unlocking adoption is building at every level. Price has chopped sideways, but as ownership broadens and institutional demand scales, that steady bid will eventually overpower OG selling and set the floor for Bitcoin's next leg. Higher.
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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 Coinstory 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.