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U.S. Gov Goes ALL IN On Crypto! Game Changer Or Power Grab? | Friday Five
00:29:47
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- [00:01]
A
The United States government is going all in on crypto, specifically on blockchain technology, all at the same time as the Trump family is going all in on crypto. We have a lot to talk about here on the Friday 5 with NLW LIVE from Vegas. Let's go. Let's do. What is up, everybody? Good morning and welcome to the Friday 5. Your weekly dose of highlights from crypto and macro news. If you like this show, you should like the channel and also subscribe. And what I like is getting this guy up at 6 o' clock in the morning in Las Vegas. That's commitments. No, not this week.
- [00:57]
B
Nothing like, nothing like the, the, you accidentally having like the silent alarm going. You wake up 602, you're. You know what? Let's, let's look. Rock and roll. So here we are.
- [01:07]
A
You're like, it's fine, man.
- [01:08]
B
I.
- [01:09]
A
The good thing is that you actually are waking up and not waiting to do the show to go to sleep, because that's what I guess.
- [01:16]
B
Oh, my God. Yeah, there's. There's a big, big difference between every time I come to Vegas, there's a, there's a chasm between the way that I did Vegas the time before it.
- [01:24]
A
Yeah. Now you just like catch a nice show and a dinner. Yeah, I know how it is now. Yeah. Well, anyways, we should probably not talk about Vegas, which by the way, is apparently completely dead and is an indic. A failing economy. But we won't go there. We've first got the United States government and their new commitment to utilizing blockchain technology. Here we go. US Puts GDP data on the blockchain in Trump crypto push. This is obviously Lutnick and the Department of Commerce and saying that they're going to basically use chainlink to bring data onto the blockchain on. I think it was eight public blockchains. First this was reported as a chain link story. Then Pith Network said they were involved, and then Coinbase said they were involved, and then they listed all these chains. What's going on here?
- [02:12]
B
How privileged are we that we can quibble about whether a story about the US Government adopting blockchain in some way actually matters at all? Because by and large, I think my response to this story, and I think lots of people's response to this story was like, whatever, that's cute. You know, it's. It's like this doesn't really seem to solve the issues of GDP and blah, blah, blah, blah. But then you like, halt the brakes. You backpedal a little bit. And when you think about whether it's just the sort of taken outside of the context of whatever cynical response we might have to sort of broader issues going on as relates to, you know, numbers and the way that the economy is reported, it's a profound and cool step, if nothing else, for the government to be exploring ways to take the immutability of blockchains and apply it to, you know, to, to, to, to government data. So I think on the one hand, I find myself, you know, being grizzled and cynical and just sort of not caring about these sort of things. But at the same time, I think, again, if you can take that step back, it's just, it's very cool.
- [03:19]
A
Right.
- [03:19]
B
This is not some grand transformational thing. And relative to the a million things that have gone on with this administration, when, you know, the history books are written, it'll be fairly low.
- [03:32]
A
Right.
- [03:32]
B
This is a tiny little footnote, but the fact that this is the type of thing that we now get as a footnote, I think is in and of itself telling.
- [03:38]
A
Yeah, but the most important question here that we haven't asked is which of my bags is going to pump because of this news?
- [03:45]
B
All of them, of course.
- [03:47]
A
Okay, good. So as long as all my bags are going to pump, it'll be big news. If none of my bags pump in the next 24 hours, this will be forgotten.
- [03:55]
B
You know, look, the, the, the, the, the question of whether blockchains have real utility does remain and lurk for some people in some sections of some markets and things like this, where, again, you can quibble about which problems, you know, a given approach might solve. But it's the US Government saying this is actually useful for XYZ reasons. And, you know, we're going to take the time to go through with it. That's, that's a cool thing.
- [04:20]
A
Yeah. So speaking of the government and adoption, we not only have the government adopting blockchain, we also have the government adopting socialism and taking free stakes in large companies. Intel gets 5.7 billion from Trump deal as White House says, details are being ironed out effectively. We have Trump Organization, Trump and the United States government criticizing intel, saying what a dumbass their CEO was. Well, now they got 10% for free. He's no longer a dumbass. And they're likely to get all the big government contracts. And, oh, by the way, best it rules out a US Stake in Nvidia after intel deal. We're not going to take all the companies. Just.
- [05:00]
B
Yeah, this one has been funny because you have, you Know, the second that someone tries to say, oh, well, there's specifics here that make it, you know, maybe not as applicable to the slippery slope style arguments that you might think, then Trump comes out and is like, yeah, we want to do this for all the companies. You know, look, I think that we, there's, there's a few different things going on here. One, the administration was always going to play by its own set of rules. You know, this frankly, like, people voted for them to throw out the traditional playbook and throw out the traditional playbook. They certainly have. Two, there's clearly an interest like, Trump doesn't see the same separation between the business private sector and the government sector when he's in the government sector because his natural home is in the private sector. And I think that if you are being generous and not just sort of trying to paint a narrative of, of sort of the loss of independence of the private sector, I think that he often operates just like. It's all sort of the, the place that he's playing in, and he gets to play in all the spheres. It's not like some grand, I mean, at least I don't believe, you know, whatever. People can have different opinions about this, but I don't think there's some grand idea to make, you know, the, the, the government is some socialist collective. I think that there are very meaningful questions around the way that private markets function. Very, very meaningful questions. And I am glad that people want to have that conversation. I think squawking and just throwing around whatever big word we think is likely to get us the most attention is unlikely to be the right path. I do think the fact that the senators who are lining up against this are sort of libertarians, and the senators who like it are Bernie Sanders is an interesting reflection of what it. But when push comes to shove, when, when it comes to this particular question, intel specifically, there is a lot underneath here that is much more specific to intel and to the chip industry and to semiconductor manufacturing than this would be if he was, you know, I don't know, whatever, taking, taking 10 of Mattel or Hasbro or something like that.
- [07:14]
A
Yeah. I mean, there's just so much to unpack here. I actually see both sides of this argument, to be quite frank. Like, you know, I wasn't totally opposed to the idea of a sovereign wealth fund when they floated it, but I didn't know that it would necessarily be stakes in individual companies that would obviously influence the way that the United States picks winners. So it's very. Not free market, obviously, to do that. This, the flip side is that we're giving a bunch of companies a lot of money anyways in grant, so why shouldn't the United States and its citizens benefit from that? So I guess I see that side of the argument. There's just literally no way that you have free, fair market competition if the United States government has a stake in seeing a winner.
- [07:55]
B
Yeah. So for me, I don't even think the grant thing. I actually think is that's for me more and still the column of bad reasoning for this particular issue. I think I'm not opposed to the idea that there are ways for the US Government to invest in mission, you know, sort of not, you know, industries or specific businesses that have critical national security dimensions to them. I don't think that retroactively saying that because we gave you grants that were supposed to be one thing, you get this other thing like that. That strikes me as problematic.
- [08:25]
A
I was more in a vacuum there. I was vacuuming. If we're going to give you my principal future.
- [08:30]
B
Yeah, totally, totally. No, there's, there's, there's no reason a priori that if a government, you know, if the government decides that an industry is, is mission critical, you know, to the, to the proper functioning and national security of the, of the country, that it shouldn't benef benefit in the upside, especially when there's such incredible wealth creation there. But I think that, you know, again, coming back to, for people who are not spending a lot of time with, you know, with and around AI and, and just sort of advanced computing in general, we do not have the capacity to make chips. Nvidia does not make its own chips. It is reliant on TSMC, which is, you know, 80 miles off the coast of China. And intel is for better or worse, the only company that even sort of has the capability to produce these things. You can't. If you let intel fail right now, which would be completely reasonable and it absolutely deserves to, basically without, without question, it's a terrible company. Like just absolutely awful. Has bungled and has been for a while. But it's not like the latest Y Combinator startup can just start a chip foundry and make it work in the next couple of years. You know. So I think that there are like again, real, real very specific questions here that, that, that make it a little bit different than some other examples. But again, you know, the, the man in the White House never, never makes things easy and clear by just saying that. It's, I want to take a stake in every company. This is Fun.
- [09:54]
A
Yeah. I was trying to just play devil's advocate for the case of the show and you shot me down anyways. But to be clear, I stand bad.
- [10:03]
B
Yeah, yeah, I saw your initial.
- [10:07]
A
No, you're. You're good. But other things I think are bad are this. Trump Media firm raises 6.4 billion to invest in Crypto.com's digital token deal includes purchase of Trump stock. There's so much here to unpack. This obviously Crypto.com's token, Kronos, which you may remember already was the topic of major controversy a few months ago because they'd apparently burnt a huge percentage of the supply a few years ago, which is what drove so much interest in the token. And then they said, just kidding, and they brought them back as a marketing budget or at least proposed to. I don't know exactly what happened, but in a world where we're seeing the biggest institutions in crypto talking about $1 billion raises and $1.2 billion raises for Solana and Ethereum, treasury companies slide way down the risk curve to a risk curve to a much lower market cap asset like Kronos and Trump Media, not World Liberty Financial. Trump media throwing 6.4 billion to buy this token. I'm going to go on record and say I think it's unlikely that they did major due diligence of the entire crypto market and we're like, need 6.4 billion in Kronos. That's the one. That's the coin we need a Treasury in.
- [11:20]
B
Look, as someone who worked inside FTX and sat on my perch looking over@Crypto.com just waiting for the clear mafia front or whatever the hell that company must actually be to fail, only to have it be my thing that was actually a fraud without realizing it.
- [11:38]
A
And they've still got the arena right now, or at least they did recently.
- [11:42]
B
Just saying, dude, I, I've still never met someone who actually uses crypto.com. it's been like eight years or something like that in this industry. Look, I don't know. I, I think, hold aside that@apologies, crypto.com. i'm sure you're doing great stuff. I'm sorry, this is, this is.
- [12:00]
A
This.
- [12:01]
B
Is obviously, man, like, this is the type of thing that I think we are doing a lot of holding our nose and dealing with because it feels like the cost of doing business with this particular administration that is so clearly a net negative for everyone in this industry, you know, whatever. I, I think you can call it like you see it and you know, this Is the, this is sort of the, the piece of the pie that we just wish wouldn't. Wouldn't happen. But it's, it is what it is. It's kind of all I can come back to. I, I don't know. I think everything that you said is correct. Like the, the difference in scale just seems absurd. The, you know, I mean, this is. We are writing all of the Democrats midterm campaigns for them. But then again, maybe it's going to be a losing strategy once more to attack crypto because it's such an abstract, you know, impersonal issue. So maybe, Maybe it's a 5D chess move.
- [12:52]
A
Pretty upset because I was feeling like crypto.com has an arena. They do F1. They're literally everywhere. And they were probably looking at the Friday 5 next as a big sponsorship opportunity. I know nothing about them, to be honest. Yeah, yeah.
- [13:13]
B
Matt Damon is.
- [13:15]
A
That's right. That was crypto.com with the boats and stuff.
- [13:18]
B
It was, yeah.
- [13:20]
A
You were there for the Larry, the, what's his face, the curb your enthusiasm era. That was the. Man. Look back at that soup, that one super bowl and where we were at in crypto, man, what a, what a time to be alive.
- [13:34]
B
If, if anyone wants a retrospective on that, like two or three Sundays ago, there was an op ed that came out that was basically like, about how crypto marketing had lost the plot and sort of, it got into the FTX era. And I spent about 20 minutes articulating exactly what our strategy was. So if you're interested, it's there.
- [13:52]
A
Perfect. And Trump hasn't stopped at taking control of financial markets, both crypto and corporates. He's also firing off Fed government governors. Trump faces key legal tests and effort to exert control over Federal Reserve. Fed Governor Lisa Cook is seeking a temporary restraining order against the president's attempt to fire her. I'm going to be honest, I saw this one and I chose to just not read it all week. Yeah, this is one of those. I was like, I could dig into this or I can just forget that this ever happens.
- [14:23]
B
Yeah, it's very, very reasonable approach, especially because when it comes to the specifics, this is going to be an endless battle. You know, Lisa Cook is not, it doesn't appear going to sort of like go off quietly and, you know, and, and just sort of accept the, the punishment being doled out for. It's going to be a battle. I think what's interesting to me, as you know, I have been observing more the market's response to this story than the story itself. And you know, it's, it's, it's dangerous, I think, to over call shifts in sentiment and shifts in, in the narrative. But I do think that the combination of discourse around this intel thing, plus all of the sort of the administration's conversations around it, plus this specific firing of, you know, this, this Fed official has for many people tipped them over from the questions that we have about the White House's intervention in private markets are lurking in something in the future to they're real, they're here right now. You had a former Fed governor who had written an op ed like three or four weeks ago, basically being like, chill out, don't worry. Trump's actual ambitions as relates to Fed independence probably aren't that bad, who then came back out and wrote another op ed and was like, whoops, just kidding, we should be worried now. And there's a lot of that happening on, you know, Fintwit and places like that. So again, it, it feels to me like the combination of recent moves have certainly ratcheted up the concern among some parts of sort of the financial analysts and financial commentary market around just how willing to intervene in sort of, you know, non government or non, non White House, at least functions of, of the market this, this White House is willing to be.
- [16:10]
A
And yet another beautiful segue. Speaking of places that they're trying to intervene in markets, it's obviously not just at that side of the Fed, but we've got Jerome Po speech who we know that Trump wants to fire, had the greatest memeable event of all time when he went and looked at his building. But we had Jackson Hole last week, the super bowl of monetary policy, where the world watches one old man for which way he's going to cough, sneeze or hiccup to see which way we're headed with financial markets. And he gave a speech and I still can't get consensus on whether it was dovish, hawkish or what it meant for future rates because people are so divided on literally everybody, everything.
- [16:52]
B
Yeah, yeah, it was, boy. Even for a man who has specialized in saying nothing with a lot of words throughout his tenure, this one said a lot with no words. I mean, to some extent it is like the final triumph of Powell from a speaking perspective that it is just fully a Rorschach test for whatever you want to say with an ever so slight perhaps head nod towards what the market wanted to hear, sufficient for them to take and run with it, as though it was exactly what they wanted to hear. You know, for anyone. We talked about this a little bit last week, whether there was going to be fireworks, you know, him just burning the house to the ground on the way out. This was, this was a very tired public official on their way out the door with the flu, barely able to get through the speech, misspeaking at key parts and having to have the transcript correct them. This was not a firebrand speech by any stretch of the imagination. Look for markets. They heard that Powell was, you know, saying that we were potentially in a place to consider a change in policy direction. Now again, there's about 18 paragraphs around it that are caveats and provisos about, you know, why things could be looked at in multiple different directions. But you know, I think that a lot of us had our odds on betting was for him trying to give himself more flexibility to not cut by being hawkish. And so the fact that simply the fact that there was an absence of that I think was the signal that the markets took and ran with. But yeah, I said I, I literally had earlier in the week done a retrospective of each of his previous pal, you know, Jackson Hole speeches and this one for my money was the one that was the least clear on what the hell he was actually trying to say and, and get to stayed consistent.
- [18:42]
A
For his final speech. It's perfectly in character. You got to give him credit. I mean, meanwhile, by the way, core inflation rose to 2.9% in July, highest since February. This just came out for those who were waiting at 8:30 this morning. This is PCE personal consumption expenditure basically slightly up since June, but in line. So we're not seeing markets probably get rocked by this because it's somewhat what was expected. But this is the Fed's favored inflation gauge for their rate decision. So it'll be interesting to see throughout the day how people interpret the likelihood that we now get rate cuts or don't based on this. Yep.
- [19:17]
B
Yeah, I, I think it's very clear that the market has a ton of anxiety right now. And you know, it has, it has for, for, I mean really since the, the rate hiking cycle started, had this lurking fear that even when things are nominally on paper going well in aggregate that it's two house of cardsy for their liking. And you see this manifest every time, you know, AI anything wobbles this week. In fact, you know, probably the interesting signal for people who are trying to get a sense of where the market's attitudes really are is that, you know, the Nvidia earnings report is, has become the, the late, the New Rorschach test, you know, the new version of, of the Fed, you know, Fed announcements. And it, you know, Nvidia was up 56 year over year, but it still fell, you know, 5% in immediate aftermarket trading because of the guidance that it wasn't going to continue to grow 200% annually like it had before. And you know, it's, it's, it's clear that we're in sort of the very late cycle, low liquidity environment. People really aren't. As much as they tried to interpret Powell's speech as dovish, super convicted in how dovish he was, you know, it's, it's really wait and see. The markets really want rate cuts. There's all these things that make them want to believe that that's what they're going to get. And of course there's the, the background thing behind it which is like, are those really the solve to all of our problems Anyways. So you know, I think that we're just going to be living in a period of sor. Heightened anxiety, I think in markets until at the very least the September Fed meeting. And I don't really see a way around it.
- [20:55]
A
Yeah, fall is going to be fun. So moving on, we got us Banks lobby to block stablecoin interest over fears of deposit flight. This is really interesting actually because when the Genius act was being discussed, this was the main point of contention between the industry and the government. The crypto industry saying we want yield on stable coins. That was where legislators basically drew the line. Even those who are likely the most favorable for stablecoin legislation. Apparently there are a whole bunch of loopholes in the legislation that allows people to earn yield on stable coins anyways. And now the banks are freaking out because they know that if you can earn a yield on a stable coin you hold in your own wallet that's better than the non interest rate you get from a bank who you have to trust, then they might absolutely be screwed. We saw the first iterations of this actually a few weeks ago when Citadel came out and said, hey, you guys need to slow your roll on this Genius act stuff. But now you have the biggest bank lobbies in the world freaking out because stablecoins could end them.
- [21:59]
B
Bro, the banks are such whiners. I mean we knew this, but good lord, like they cry more petulantly than any industry. Like, sorry, guess what, you've got competition here. You don't have a regulatory MO same way you used to. There are new products that are competing for people's attention Go build stuff, man. Do you know how slow people change the idea that the banks are going to, you know, sit there and just spend the next couple years, you know, screaming and hollering about what crypto native institutions can and can't do, as opposed to just build updated products. Consumers are not on mass going out surveying where they're going to get the best yield for their, you know, copious deposits that aren't being used day to day to make them survive. Yeah, Nerd Wallet. It's at best a tiny fraction of them go to Nerd Wallet. Most of them, you know, are like, it's just, it's just such a, such a, you know, whatever. I mean, obviously I'm, I'm biased towards a more entrepreneurial kind of, you know, build it kind of mindset, which I think a lot of people who are in crypto find themselves in, even if they're not necessarily coming from tech. It's an industry that has attracted people who are, you know, focused on competition and like free markets and all these sort of things. So I think it's particularly galling to see banks try to exert this, this sort of playbook to, to keep their, keep their position. But, you know, it's, it's very clear. I think this is whatever. Look, my, my theory on this or my belief on this is that whatever victories the banks can win, and they will win some in the short term for sure. I mean, even the fact that the Genius act is written as it was, they are going to survive or not based on how they compete with changing times. And all you need to do is look at the banks who are getting right on board with this and instead of spending a time on these types of efforts, are instead lining up partners and trying to figure out how they get a piece of the action. But there are really meaningful questions here and a lot of battles to be had because part of the thing that happened with the Genius act was that we just simply kicked the can down the road on a lot of the amendments that people wanted to put. So there was an amendment debate. Basically it all moved to the Market Structure Act. So there are these big unresolved questions that are going to change the nature of that particular fight. And so I think a lot of what you're saying seeing is not just scuttlebutt around the specific implementation of the Genius act at the potential loopholes therein, but also, you know, sort of a proxy for the larger battles coming as Congress comes back into session around the Market Structure bill, which is sort of now the recipient of all of these conversations that didn't get finished when it came to the genius act.
- [24:45]
A
So I know we're kind of hitting our normal time. We have a few stories left. We'll call Cook. Through them, Google Cloud is developing its own blockchain for payments currently in private. Testnet. This is wild. We saw the Circle announcement recently, and Stripe had an announcement recently. Taking a little bit off the shine of your favorite token is going to go up because institutions are going to adopt that network for what they're building.
- [25:08]
B
Yeah, you know, look, everyone's gonna. Everyone's gonna try and build their own thing. How, how. How long it lasts. Lasts. We've seen this story before. I think there's reason to be skeptical. But if you want to take a positive or sort of optimistic view of this, Google only does things because they think there's really interesting economic activity and they think it's good for them. So this is not a. This is not a story that's like just trying to jump on a trend for headlines. It's them, you know, looking to participate in this space. So again, maybe we. We quibble around the efficacy of sort of the Balkanized public or private chain world that, you know, seems to be coming back around again. But it is, I think, an indicator of, broadly speaking, where things are going that the behemoth that is Google is interested in, again, in this big way, 100%.
- [25:58]
A
And this is a story that's been unpacked all week. But still, I think kind of one of the bigger stories of the week was that we had the bitcoin dump last week on a Sunday because somebody sold 24,000 bitcoin into thin liquidity on a weekend. And this really being pointed to for the reason we kind of started trading down here around 100, 110,000 where we're sitting right now. I mean, any new and unique thoughts on this one?
- [26:22]
B
No, to. To me, I thought that the best take on this, the one that, like, you know, again, you're not going to be able to apply this to everyone. But Checkmate, formerly of Glassnode, who obviously does on chain data, said what this means is bitcoin demand has. Oh, no, sorry, that's the. That's the wrong tweet. Anyways, he said something basically that's like. Like this isn't complicated, guys. You know, a couple of years ago, bitcoin whales were looking at, you know, the, the, the. The threat that their, you know, main asset could be seized and forfeit from an unfriendly government. And now we're in the place that we are. You know, by and large, if you want an explanation for whale selling, it's that they can finally estate plan and do all the things that they haven't been able to do for a decade. And it's as simple as that. And I think that, you know, know, broadly speaking that's sort of where, where I am with, with all of the whale selling. I think in each particular case there are plenty of, plenty of things that, that contravene that if you go look at sort of specific examples, but I don't know, I think that we will look back at this period of whale selling in this sort of favorable early days of this administration as just a very kind of a one time, you know, in retrospect, inevitable sort of distribution. I think the other thing is again, if you're zooming out far enough, stuff you need. As bitcoin becomes a bigger part of the global system, you have to have whales redistribute some of their stack. Otherwise it's going to be hugely problematic.
- [27:53]
A
Right.
- [27:53]
B
If everyone is accumulating just like Saylor, there's very little supply to go around. So there's reasons to be glad, even if not in the short term for our bags, that there's some amount of whale redistribution happening. But none of those stories ultimately freak me out all that much in the context of just the very natural human need to diversify and get some liquidity.
- [28:16]
A
I mean, listen, price is still down now, but if you remember what actually happened on Sunday was price went down $4,000 in a few minutes and bounced all the way back up. So if you were looking at it in real time, actually the market on a Sunday in low liquidity had enough demand to absorb 24,000 bitcoin and selling and bounce right back and only be down a couple, couple percent on the day. That's the bigger story I think if you were actually watching it in real time.
- [28:42]
B
Yeah, I think it's a great point.
- [28:45]
A
So I'm gonna let you go back to sleep after your long night at Marquee. I know that you were clubbing until.
- [28:51]
B
You came to this show Omnia here at the, here at Caesar's Palace.
- [28:56]
A
Just never leave your mouth in the pools. Like don't let any of that water ever. It's, there was this study on it, man. Man, it's the dirtiest place on earth. You'd rather like drink the Ganges than the encore beach Club swimming.
- [29:09]
B
There's, there's weird signs around how you know, you're not supposed to go in the pool if you have, you know, giardia. It's like. Well, thank you. That wasn't.
- [29:16]
A
Sure if you have a paper cut. Yeah, avoid. Avoid this pool like the plague, because you might actually get it. All right, guys. NLW is amazing. Check the breakdown. Let the guy go back to sleep. We'll see you next week.
- [29:29]
B
Later, guys.
- [29:30]
A
That's dope.