The Wolf Den #922 - The Biden Administration Still Hates Bitcoin
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In This Issue:
The Biden Administration Still Hates Bitcoin
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Grayscale Launches Bitcoin Mini ETF
VanEck Hits Record Volume
‘The Flood’
Coinbase Is Raising $1B
Is A Bitcoin Emoji Coming Soon?
Bitcoin Will Hit 150,000 | Major Announcement!
The Biden Administration Still Hates Bitcoin
There’s a lot to unpack about the current (U.S.) administration's stance on Bitcoin.
The election is just 237 days away, and Biden and his administration are signaling that his platform will not champion crypto, while Trump is gradually warming up to Bitcoin.
I generally steer clear of political discussions and am no fan of either candidate, but regardless of my feelings, I am compelled to report on our industry as I see it. And when it comes to Bitcoin, it's clear that the Biden administration (and more specifically Elizabeth Warren) views the asset as a highly speculative, underground currency that is being used for terrorist financing and contributes to global warming. They desperately want egregious oversight from the IRS, SEC, and EPA.
I'm unsure whether this stance is influenced by special interest groups and agencies advocating for their own gain or if it genuinely reflects Biden's beliefs. I doubt he personally even knows what Bitcoin is. However, regardless of the reasons, this is the reality we will likely continue to confront for another four years if Biden is re-elected this November.
Today's newsletter will delve into another tactic by the administration aimed at undermining Bitcoin, particularly targeting miners, through the introduction of the DAME tax.
The Digital Asset Mining Energy (DAME) tax proposal isn’t actually a new concept. You may recall it from Biden’s 2024 budget plan which ultimately failed to pass through Congress. Well, it is back in the 2025 fiscal year proposal.
Wonderful.
The concept behind the DAME tax is straightforward: it aims to burden Bitcoin miners with an excise tax on electricity costs, beginning at 10% in the first year, escalating to 20% in the second year, and further increasing to 30% in subsequent years. The image below is taken from a White House report discussing this tax.
I'll provide more details shortly.
Essentially, the Biden administration is saying f**k you to miners, forcing them to leave the U.S. or close shop under this new tax law. Riot Platform researcher Pierre Rochard had the following to say regarding the DAME tax. I agree with this take.
Scrolling down through the White House’s report, the image below was used as evidence of “Cryptominers’ high energy consumption.”
Where is the tax on refrigeration and television? Under this logic, shouldn’t we be more concerned about cold food and commercials than U.S. crypto? Also, the fine print mentions Ethereum mining, which doesn’t even exist anymore. Will that correction be accounted for in the 2025 proposal? I doubt it.
Further, the source of the energy is the most important aspect of the debate, which consistently fails to be addressed. Bitcoin miners are not using much electricity from the main grid - they are using wasted energy.
One last point to highlight from the report because I think you get the gist.
“Currently, cryptomining firms do not have to pay for the full cost they impose on others, in the form of local environmental pollution, higher energy prices, and the impacts of increased greenhouse gas emissions on the climate. The DAME tax encourages firms to start taking better account of the harms they impose on society. Of course, the DAME tax is not a panacea—it is only one example of the Administration’s efforts to fight climate change, reduce energy prices, and increase access to electrified options for all Americans.”
What is the justification for a blanket tax on miners who resell energy to the grid from renewable sources, especially if the tax is ostensibly about environmental concerns? It's more than apparent that there are underlying motives behind this tax, which seem to include suppressing Bitcoin, generating billions in revenue, and paving the way for a CBDC.
Biden is making it more than clear that his administration will not be nice to crypto if he is elected.
The line has been drawn in the sand and it is clear Biden is not for Bitcoin.
I've always believed that Bitcoin would become a national political topic, but I never expected it to happen this early, suggesting that we can expect much more discussion on the topic in the near future.
To summarize the stance of the current candidates.
Biden - against Bitcoin
Trump - neutral
RFK Jr. - Outspokenly pro Bitcoin
I have no doubt that Bitcoin can and will withstand any president the U.S. elects but having one willing to enact sensible legislation will definitely become a powerful force for good.
I’m hoping for a miracle where a middle-ground, pro-crypto candidate captures the nation's attention, but I'm skeptical. Nevertheless, I'm committed to doing all I can to support pro Bitcoin candidates (like John Deaton), and I hope you are too. Bitcoin is depending on us—it's our responsibility to step up.
Bitcoin Thoughts And Analysis
What a fun day. Bitcoin “crashed” back to the previous all time high around $69,000, predictably testing it as support before seeing a huge move back up near the daily highs. It has continued up since, now trading above $73,000.
What is there to say? There’s more demand than supply.
Altcoin Charts
This remains one of my largest holdings, and one that I have been sharing since the bottom. I have traded around my core position.
As you can see, after months of consolidating, INJ has broken out for a new all time high. This means that it is once again in a blue sky breakout. It may not come back for a retest, but conservative traders like to buy the previous highs as support in a situation like this. This is the area from around $44 to around $46.50.
Legacy Markets
Stock markets showed signs of pausing after a recent rally, with minor changes in futures for major US indexes despite anticipation of Federal Reserve rate cuts this year. This sentiment persists even after US inflation rates were reported higher than expected, indicating that the battle against inflation is far from over. Traders are nearly 70% certain the Fed will begin reducing rates in June, anticipating at least three quarter-point cuts throughout 2024. This comes ahead of the Fed's next meeting, where investors will closely watch for any shifts in the central bank's outlook based on recent economic data.
Meanwhile, in Europe, the Stoxx 600 index saw slight gains, driven by the retail and utility sectors, amid indications from the European Central Bank (ECB) that rate cuts could commence soon, possibly as early as the coming months. This outlook is supported by comments from ECB officials suggesting that a decrease in borrowing costs could occur by June.
In the corporate sector, Nvidia's shares rose in premarket trading, hinting at a continuation of its rally, while Tesla's shares dipped following a downgrade. Dollar Tree reported lower-than-expected sales and profits, alongside plans to close around 600 stores.
On the commodities front, oil prices recovered after a four-day drop, buoyed by reports of decreasing US crude inventories, despite concerns over OPEC's fluctuating production cuts. Gold prices stabilized after a decline caused by the unexpected inflation report, halting a series of gains.
Key events this week:
Eurozone industrial production, Wednesday
ECB Governing Council member Yannis Stournaras speaks, Wednesday
Volkswagen, Adidas earnings, Wednesday
US PPI, retail sales, initial jobless claims, business inventories, Thursday
China property prices, Friday
Japan’s largest union federation announces results of annual wage negotiations, just ahead of Bank of Japan policy meeting, Friday
Bank of England issues inflation survey, Friday
US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 7:37 a.m. New York time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.2%
The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0939
The British pound was little changed at $1.2801
The Japanese yen fell 0.2% to 147.97 per dollar
Cryptocurrencies
Bitcoin rose 3% to $73,220.6
Ether rose 2.5% to $4,051.46
Bonds
The yield on 10-year Treasuries advanced one basis point to 4.16%
Germany’s 10-year yield was little changed at 2.33%
Britain’s 10-year yield advanced three basis points to 3.98%
Commodities
West Texas Intermediate crude rose 1.4% to $78.67 a barrel
Spot gold rose 0.2% to $2,163.23 an ounce
Grayscale Launches Bitcoin Mini ETF
Yesterday morning, Grayscale announced its latest BTC product (with ‘BTC’ as the ticker) which will function as a spinoff of GBTC. In this arrangement, new shares of the trust will be distributed to GBTC holders, and GBTC's Bitcoin holdings will be transferred to the trust. Essentially, the filing is a means for Grayscale to compete with the other available ETFs that offer lower fees.
“Pending approval, we plan for this new ETF to launch with a materially lower fee. This would be net-positive for existing GBTC investors, who would benefit from a lower blended fee with the same exposure to Bitcoin, spanning ownership of shares of both $GBTC and $BTC.
Through the innovative mechanics of a GBTC “spin-off” — which means a certain amount of the #Bitcoin backing #GBTC shares (as of a to-be-determined record date in the future) would be utilized to ‘seed’ the new #BTC Bitcoin ETF.
This would be an exciting innovation for the ETF wrapper, because while ‘spin-offs’ are commonplace, the market has never experienced a spin-off of a commodity-based ETF.”
VanEck Hits Record Volume
VanEck has made a strategic move by reducing its current ETF fee from 0.2% to 0% until March 31, 2025, or until reaching $1.5 billion in AUM. Following this announcement, VanEck experienced a significant surge in volume, attracting fresh funds equivalent to 1,600 BTC, which is approximately 20 times their normal daily flows on the first day of the announcement, with continued follow up. VanEck's ETF now holds over 6,000 BTC and is rapidly approaching the $500 million mark. If the volume continues at this pace, the fee reduction will expire soon unless VanEck adjusts the terms of their 0% fees. It appears that VanEck did not anticipate such a substantial increase in volume, considering the distance of their deadline and the relatively low maximum set. This is bullish.
‘The Flood’
$1.7T asset manager Patient Capital Management filed with the SEC to buy Bitcoin with funds up to 15% within its $1.4B Opportunity Trust Fund. “Effective immediately, the Fund may seek exposure to bitcoin by investing up to 15% of its net assets in exchange traded products that are registered under the Securities Act of 1933 and invest primarily in bitcoin (“Bitcoin ETPs”). Therefore, all references to Grayscale Bitcoin Trust throughout the Prospectus and Statement of Additional Information are replaced with references to Bitcoin ETPs.” We occasionally see stories like this emerge. However, I foresee a future where the volume becomes so overwhelming that we can't keep up with all of them. 'The flood.'
Coinbase Is Raising $1B
There seems to be a rush to conclude that Coinbase is "taking a page out of MicroStrategy's playbook," but I'm not entirely convinced. While this move could potentially free up capital for the company, the official announcement indicates that there are no plans to use this capital to buy Bitcoin.
Is A Bitcoin Emoji Coming Soon?
The 'Bitcoin Deserves an Emoji' movement spearheaded by Nexo has teamed up with some major Bitcoin companies i.e. Bitcoin Magazine, Bitget, Brink, Chainalysis, Hacken, Nansen, and Unstoppable Domains to bring Bitcoin into the digital lexicon. The campaign is now on Change.org and will be submitted to the Unicode Consortium within the 2024 submission window. If the movement doesn’t pick up steam, I think it will later this year. Bitcoin will earn itself an emoji sooner or later.
Bitcoin Will Hit 150,000 | Major Announcement!
I am joined by Joe Vezzani, Co-Founder & CEO of LunarCrush, with whom we are going to break down the recent news in crypto, discuss what's happening with Bitcoin, and make a major announcement!
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Concise and informative, reading your substack is a great way to start the day. Thanks Scott