Why Bitcoin ignored the Fed

[00:02] exploded. The Dow went down and Bitcoin did nothing, which might actually be good news. Meanwhile, Robin Hood reported earnings, and in a big shocker, prediction markets than they did from crypto and even from stocks. Those are

[00:17] unpack right now on the Daily Wolf. Let's go.

[00:29] Daily Wolf on Yahoo Finance. I am your host, Scott Melker, also known as the wolf of all streets and I am conveniently camouflaged and blending into the background. I can see my shirt and it's basically the same color as the

[00:42] different shirt next time. I hope you're all having a wonderful Thursday. We've all having a wonderful Thursday. We've got about 15 minutes right now to dive into everything happening in the crypto and macro news and try feudally to make

[00:57] sense of it. And obviously the big story of the day. Yesterday we had sock puppet Kevin Worsh leading a very boring Fed meeting. of the past where we always had consensus and we knew exactly what

[01:12] breath and wondered if he would scratch his nose or his ear or what color tie he would wear and how markets would react to those things. Well, now we basically to those things. Well, now we basically get a mute uh Fed chairman who tells us

[01:26] nothing, no forward guidance and no dot plots, and we can just guess what he's thinking. But here we have the Fed's hawkish hold muddies path for stocks and bonds. So here's what happened. The Fed held rates at 3.5 to 3.75%.

[01:41] Maybe the biggest story is that we used to get consensus. That's what Pal always agreement. Everybody is voting the Well, we had three officials dissenting and they wanted a hike immediately. So,

[01:55] might have rocked the markets. He said there is no soft inflation target. Basically recommitting to the idea that they want to get inflation down to 2%. On this news at the time, oil jumped more than 7%. That likely also has to do

[02:09] with the conflict in Iran. And the Dow lost 1,153 points. Treasury yields surged and Bitcoin just kind of hung out there around $64,000, which is good news. Now, I just want to show you a tweet from my

[02:23] friend Jeff Park over here, who I had on my morning show last week live from the Audi Summit. July 31st, 2007 was the day Bear Sterns liquidated its subprime mortgage portfolios, marking the beginning of the great financial crisis

[02:37] and the eventual birth of Bitcoin. Today, the 30-year yield passed 5.2%, 2% the highest level of the year and since that dramatic event the time for Bitcoin is near. So the bond market obviously is saying that uh financial conditions are

[02:53] not believing that we're going to get rate cuts anytime soon. I believe when I checked this morning the odds of a rate hike in September were over 70% they're going to hike are probably smoking crack because you have Donald

[03:10] Worsh is doing and making a comment to the effect of Kevin knows exactly what he needs to do. All right, Kevin going to cut. It's going to cut. Right. So, listen. I think that we're in this amazing moment right now where Bitcoin

[03:25] has largely decoupled. We've heard narratives over the years that it trades supposed to trade like digital gold. The fact is markets have been all over the sideways. Now does that mean that Bitcoin has suddenly become the safe

[03:39] Absolutely not. That is not evidence of that. But it is relative strength and may indicate that there's far fewer leveraged holders and far fewer nervous sellers right now than there were in the market. Maybe they've all already sold

[03:54] and are not reacting to macro. But it also lends to my thesis over the last you know 18 years of Bitcoin's existence existence 17 years that maybe it's just trades like those other things but a beautifully uncorrelated asset is the

[04:10] holy grail for any investor's portfolio and we are seeing that right now. The problem is sometimes when you have an uncorrelated asset it doesn't go up when everything else does but when it goes up and everything else is going down you're

[04:23] very very happy to be holding it. So the next story that we have today is not necessarily a crypto story, but it certainly shows you where all the a lot of the money that was interested in crypto is. It's an AI. And in this

[04:35] earnings bonanza that we've had of late, so we had the FOMC, obviously the Fed meeting yesterday, but we also had Meta, Microsoft, Robin Hood reporting earnings. We have a story about Robin Hood coming. And then tonight, Coinbase

[04:47] which is interesting. But here you go. Meta and Microsoft report ballooning AI expenses. But that's not really the story. The story is that you had two companies reporting that both had massive increases in expenditures in

[05:02] capex. We know that everybody is spending tens of billions of dollars every quarter now and it's only increasing on AI infrastructure, but the market effectively rewarded Microsoft's earnings and punished Meta. Microsoft

[05:14] was up, Meta was down. So, let me just tell you the numbers. So, Microsoft had quarterly revenue of about 90 billion. Microsoft cloud revenue was 59.3. Azor growth was 43% and C-pilot now has more than 30 million paid seats. So they have

[05:30] future contracted revenue at 678 billion. So the market can see that they have money that's going to come in while they had quarterly capital spending of approximately $ 41 billion in a quarter on AI infrastructure. Now on the Meta

[05:44] side, you had revenue grew 28%. They did exceptionally well still on advertising performance. So there was some good news. Their quarterly capex reached billion. So between these two companies about 72 billion dollars spent on AI

[06:00] infrastructure. Their free cash flow though collapsed from 8.5 billion to about 784 million and they're expecting 130 to 104 billion in capex. So why would Microsoft be up and Meta be down? Because now the

[06:15] market just doesn't want to see you blindly spending on AI. They want to see Microsoft as I said they had massive growth in Azour. They had massive growth in co-pilot. They have future revenues that you can see and they're out earning

[06:30] basically their spending. Meta it's a lot more muddled. They're spending a ton results of that are and the market is punishing them for me. This isn't simply that Microsoft is succeeding and Meta is failing. It's that Microsoft can

[06:45] directly sell AI infrastructure and software and people don't really know where the revenue is going to come from for Meta as of yet. I mean, Meta spent 31 billion on AI in one quarter. For

[06:58] could explain to them why the stock's going down. It's like Zuckerberg. going down. It's like Zuckerberg. Dearest Sam Alman at OpenAI, sir, can you please explain to me why my stock is going down when I have spent a lot of

[07:12] money on the AIS? Thank you. And then it obviously it responds, uh, Mark, we're sensitive to your feelings because it's it's woke. AI is woke. I've been told but hey, anyways, what are you going to do? Next story is another one of

[07:27] season. And this one actually does more directly touch crypto uh but doesn't touch crypto in the ways you want to be touched. Robin Hood beats quarterly profit estimates as trading activity remains robust. So let me just give you

[07:42] the numbers here. You might notice something. They smashed Robin Hood something. They smashed Robin Hood quarterly revenue record 1.31 billion. Biggest revenue ever. Big numbers huge numbers. The best numbers. Their options

[07:56] revenue was 342 million which is good to know that uh their traders are still degenerates. Prediction market revenue 156 million stock trading revenue 129 million crypto revenue 100 million event

[08:14] contracts increased more than tenfold. Customers traded 13.6 Customers traded 13.6 billion prediction markets contracts. Think about this. Robin Hood made 56% more from prediction markets than they

[08:29] did from crypto. And they just launched these a few months ago. Now, you'll remember last quarter, I think I I I'm not going to give the exact number Robin Hood's crypto revenues were down 40ome percent. 41 47 something like

[08:42] that. 67. Um, this month I believe they were down just over 30%. More, right? And we know that there's no volume in trading crypto right now. A lot of that money has followed AI and hotter trends and certainly prediction markets. But

[08:58] the fact is that Robin Hood is no longer democratizing finance. They're democ democratizing parlays, right? I mean, this is what people want. They want sports, politics, economics, entertainment. They're they don't want

[09:10] entertainment. They're they don't want to be dependent on, you know, memecoins going up in a crypto bull market. What they want right now is just to be able to make a directional bet that lets them express an opinion with money. Will this

[09:23] happen or will this not happen? I want to put my money on that. And it really is a simpler way, I think, to express your view. And it makes sense that popular. But I don't think customers care anymore if it's a stock, a token, a

[09:37] derivative, or a sports bet. They just want to gamble in the most convenient that. Now, as I mentioned before, Coinbase is reporting tonight, I I I

[09:49] don't know what the estimates are, but that's going to be slaughterhouse 5. massive revenues in crypto trading. To their credit, I mean, in their last 12 new products. They were already doing over 100 million in revenue. They're all

[10:03] they're all, you know, going after the same idea. And maybe that's really the broader story here beyond just Robin Hood revenues, right? This is a world now where you have everybody trying to do the exact same thing, right? You have

[10:17] Coinbase, Robin Hood, OKX, and then from the prediction market side, you have launching perpetual swaps. Everybody wants to be the everything app. And the fact is, if they're going to survive, they have to. I don't think you can just

[10:32] be a crypto exchange anymore. Look what happened to BitMX and BitMart and happened to BitMX and BitMart and Bitfart and Bit Dart. I why why are they all bid right it you cannot survive anymore

[10:45] simply on having people trade there was a story today that Binance US which uh barely you know is just coming back uh is launching prediction markets themselves and seeking CFDC approval to do so very clear exactly what everyone

[10:59] wants to do and more importantly what everyone needs to do now for everybody's everyone needs to do now for everybody's favorite topic the clarity act rules on Trump's crypto ventures to White House, sources say.

[11:14] So, listen, we're we're there, man. We're getting to the uh we're getting to the finish line. Brian Armstrong said that the Clarity Act is at the one yard line. The problem is he didn't say which one yard line. What if we're 99 yards

[11:28] away? Right. And listen, like even if we're at the one yard line, any Seahawks when the clock's running out at the one yard line, right? I mean, the Clarity Acts at the one yard line in Washington, that means like six more months and

[11:42] three committees and 12 votes and something called closure. They have to do closure. It's a thing, right? So the fact is that right now we do have a Republican senator and a Democrat senator Tillis and Ggo coming

[11:56] together for an updated proposed ethics framework. That really is good news. All joking aside, right? The problem is they haven't presented it to the White House after the White House proposed what they called historic compromise and said that

[12:10] Democrats have seen it. And we know that we need at least seven Democrats, maybe more, to vote for this. So, it's a statement of progress, but it's a statement of progress when we have about

[12:23] a week left to really get this done. It's a proposal, not not a completed deal. The other thing worth remembering is that the Democrats have explicitly said it ain't just ethics. They want still to have questions about stable

[12:36] coin rewards, DeFi developer liability, elicit finance requirements, right? So, uh, we don't even know if they're completely at consensus for all of the

[12:48] other things in this bill. That said, it's getting closer than we probably believed it would be. And if there really is a thirst to get this done, it's possible. It is possible that they will. Now, uh, one last story that's

[13:04] also sort of, uh, crypto adjacent here because it does not necessarily affect this discovering cryptographic weaknesses with Claude. The story here is that anthropics Claude Mythos uh which apparently should be called

[13:19] Thanos because you just kill everybody, right? But Mythos found a major weakness in Hawk, which is a great new show on Netflix with Will Frell. Highly actually an experimental postquantum signature system that's being evaluated

[13:34] by NIST, which survived two years and two rounds of expert human review. Well, uh, AI unprompted went in there for about $100,000 of compute and found a about $100,000 of compute and found a weakness in 60 hours. So, what's

[13:48] interesting here is it's not like we broke postquantum security, but AI did find a weakness in an experimental candidate for postquantum cryptography, uh, which is what it's supposed to do.

[14:01] But we're now at the point where we're building postquantum security for computers that don't exist yet. and AI is already attacking those and showing vulnerabilities. I guess this is both a positive and a terrifying story. Like I

[14:14] said, it won't hurt Bitcoin and Ethereum, but it shows that even the quantum proofing that we're doing is already having potential problems identified by AI and we don't even know where AI will be at the time. I'm not

[14:29] it's important to know that we can't really handicap what's coming with AI. So listen, Bitcoin is holding strong uh for now in what many would believe is a cracking market and we got a lot to watch for with Coinbase and Strategy

[14:45] earnings. That's all I got for you today. I'll be back tomorrow with the today. I'll be back tomorrow with the next Daily Wolf. Peace.