Podcast Summary: "Nation-States Ready To Buy Bitcoin?"
The Wolf Of All Streets
Host: Scott Melker
Guest: NLW
Release Date: January 10, 2025

Introduction

In this episode of The Wolf Of All Streets, host Scott Melker engages in a deep discussion with his guest, NLW, about the evolving landscape of Bitcoin adoption by nation-states amidst shifting macroeconomic factors. They delve into market behaviors, regulatory developments, and the potential future of Bitcoin as a strategic asset for governments.

1. Current Market and Macroeconomic Climate

Scott Melker opens the conversation by questioning why Bitcoin prices are down despite optimistic forecasts from institutions like Fidelity, which anticipate significant Bitcoin adoption by corporations, sovereign wealth funds, and pensions in 2025.

• Scott Melker [00:00]: "Fidelity certainly think so. They also seem to think that we will see more corporations adding Bitcoin, more sovereign wealth funds adding bitcoin, more endowments and pensions adding Bitcoin, leading many to believe that 2025 year will be the biggest year in the history of our beloved asset class."

Key Points:

• Market Uncertainty: Both Melker and NLW highlight the current uncertainty in the markets, exacerbated by changing political landscapes and inconsistent economic data.
• Job Report Impact: An unexpected surge in U.S. job additions and a slight decrease in unemployment have created a paradox where positive economic indicators negatively impact market sentiment.
  • Scott Melker [03:16]: "Right. You think that unemployment going down and more people having jobs would be exciting, but that means that the Fed's less likely to cut rates and will probably pause..."

2. Bitcoin's Correlation with Traditional Assets

The discussion transitions to Bitcoin’s recent price movements and its correlation with traditional financial markets, especially amid rising yields and stock market volatility.

• Scott Melker [05:42]: "Bitcoin slips below 93K, Bitcoin ETFs after seeing record inflows, seeing record outflows. But it's just very clear that as these yields have raged, bitcoin and everything else have finally sort of suffered."

Key Points:

• Increased Correlation: Bitcoin has shown a higher correlation with traditional assets like the Nasdaq, moving inversely during periods when yields rise and stocks decline.
• Absorption Capacity: NLW points out that Bitcoin's ability to absorb sell pressure has improved over the years, making it more resilient than in previous cycles.
  • NLW [21:14]: "I think that the price right now reflects not going to get in its way versus is an active kind of like wing wind underneath its wings."

3. MicroStrategy’s Performance and Michael Saylor’s Strategy

A significant portion of the conversation focuses on MicroStrategy, a company heavily invested in Bitcoin, and its CEO Michael Saylor.

• Scott Melker [10:49]: "Despite the recent pullback, MicroStrategy finished 2024 as the best performing major asset in the world with Bitcoin as number three."

Key Points:

• Outstanding Performance: MicroStrategy has emerged as a top-performing asset, showcasing the potential profitability of substantial Bitcoin investments.
• Saylor’s Aggressive Accumulation: Saylor’s relentless strategy to acquire more Bitcoin raises concerns about the concentration of Bitcoin holdings and its implications on the market.
  • NLW [12:44]: "When you have someone who's just willing to continue to throttle it, you know, and see what else can be done to acquire more, you're gonna get some weird scenarios..."

4. Regulatory Challenges: FDIC and Operation Choke Point 2.0

The episode delves into recent actions by the FDIC concerning cryptocurrency-related activities, shedding light on ongoing regulatory pressures.

• Scott Melker [14:16]: "FDIC asked financial institutions to pause crypto related activity according to letters obtained through Coinbase lawsuit... Operation choke point 2.0 wasn't just some crypto conspiracy theory."

Key Points:

• Operational Pressure: The FDIC has issued directives to financial institutions to halt crypto activities, revealing efforts to curb the growth and integration of cryptocurrencies in traditional banking.
• Legal Battles: Heavy redactions in official communications suggest underlying motives to restrict crypto practices without transparent justification.
  • NLW [15:21]: "It turns out that those redactions weren't covering up specific, you know, private information. They were covering up very specific programs that the FDIC didn't want banks to understand, undertake."

5. Government Bitcoin Reserves and Strategic Adoption

A focal point of the discussion is the potential for governments to hold Bitcoin as part of their strategic reserves, influenced by institutions like Fidelity forecasting such moves.

• Scott Melker [22:19]: "Fidelity saying that nation states, central banks expected to buy Bitcoin in 2025."

Key Points:

• Strategic Reserve Asset: The possibility of countries adopting Bitcoin as a reserve asset aligns with broader concerns about inflation and currency debasement.
• Game Theory in Adoption: As more institutions and nations consider Bitcoin, the momentum could shift from speculative investment to institutional adoption, reinforcing Bitcoin’s legitimacy.
  • NLW [23:45]: "This continues the trend that we've seen of this, this idea, this particular aspect of game theory being taken seriously."

6. Silk Road Bitcoin Liquidation

The episode also touches upon the recent authorization for the federal government to sell $6.5 billion in Bitcoin seized from the Silk Road case, exploring its potential impact on the market.

• Scott Melker [19:14]: "The federal government just got the green light to sell 6.5 billion in Bitcoin seized from Silk Road..."

Key Points:

• Market Impact: While the liquidation of seized Bitcoin may cause short-term volatility, both Melker and NLW argue that Bitcoin's market has matured to absorb such pressures without long-term detriment.
• Legal Ownership Issues: Questions arise about the rightful ownership of seized assets, paralleling scenarios where stolen property is in legal limbo regarding original ownership versus government possession.
  • Scott Melker [22:30]: "If somebody walks into your house and steals your wife's watch and the police then catch that person, does that watch belong to you or the police?"

7. Future Outlook and Conclusion

In wrapping up, Melker and NLW speculate on the future trajectory of Bitcoin adoption and its relationship with governmental policies, especially with potential administrative changes.

• Scott Melker [24:32]: "It's going to be a really interesting year no matter what."
• NLW [25:08]: "I think that the price right now reflects not going to get in its way versus is an active kind of like wing wind underneath its wings."

Key Points:

• Administration Influence: The actions and policies of the incoming administration, particularly within the first hundred days, could significantly influence Bitcoin's adoption and market confidence.
• Market Sentiment: Both hosts emphasize the importance of monitoring governmental support and regulatory stances as pivotal for Bitcoin's sustained growth and integration into traditional finance.

Notable Quotes

• Scott Melker [03:16]: "You think that unemployment going down and more people having jobs would be exciting, but that means that the Fed's less likely to cut rates..."

• NLW [12:44]: "When you have someone who's just willing to continue to throttle it...you're gonna get some weird scenarios..."

• Scott Melker [10:49]: "Despite the recent pullback, MicroStrategy finished 2024 as the best performing major asset in the world with Bitcoin as number three."

• Scott Melker [19:14]: "The federal government just got the green light to sell 6.5 billion in Bitcoin seized from Silk Road..."

• Scott Melker [22:30]: "If somebody walks into your house and steals your wife's watch and the police then catch that person, does that watch belong to you or the police?"

Final Thoughts

Scott Melker and NLW provide an in-depth analysis of the complex interplay between Bitcoin’s market dynamics, regulatory challenges, and the potential for institutional and governmental adoption. While recognizing current uncertainties and regulatory hurdles, they maintain an optimistic view of Bitcoin's resilience and growth prospects, contingent on future administrative actions and broader economic conditions.

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