WEBVTT - Cloudy With A Chance of Crypto Winter

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<v Speaker 1>I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,

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<v Speaker 1>and this is Bloomberg Crypto, a daily Bloomberg I Heard podcast.

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<v Speaker 1>It's Monday, July eighteen. You could argue that crypto is

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<v Speaker 1>no stranger to recession. In fact, it was the financial

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<v Speaker 1>crisis of two thousand and eight that birthed the idea

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<v Speaker 1>of bitcoin in the first place, But this recession is

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<v Speaker 1>a little different. In the decade or so since that

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<v Speaker 1>formative Bitcoin white paper, crypto has experienced spectacular growth, rising

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<v Speaker 1>and then record prices have led to investor fomo fear

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<v Speaker 1>of missing out. But now in the middle or maybe

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<v Speaker 1>in the beginning of this crypto winter, investors who entered

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<v Speaker 1>the digital asset class during that rising bullmarket period are

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<v Speaker 1>reevaluating their entire relationships with digital assets. For more on

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<v Speaker 1>this shift from fomo to oh No, joined by Bloomberg

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<v Speaker 1>Reports to Claire A Balentine, Claire, so good to have

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<v Speaker 1>you on the show. Thanks for having me. Not, however,

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<v Speaker 1>so good for some of the folks listening to the

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<v Speaker 1>show at the moment. Definitely not. It's been a tough

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<v Speaker 1>time for crypto traders, especially the ones that are sort

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<v Speaker 1>of new to the space. What's been going on exactly?

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<v Speaker 1>I mean, obviously we've been covering pretty much every element

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<v Speaker 1>of how crypto prices are declining, But why are retail

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<v Speaker 1>investors right now really having a tough time? Yeah. So

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<v Speaker 1>for a lot of the retail investors, UM, they piled

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<v Speaker 1>in pretty recently to crypto. So you know, we saw

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<v Speaker 1>prices peak in November of last year, and for many

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<v Speaker 1>of them, that was right around when they jumped on.

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<v Speaker 1>Maybe a little earlier, maybe a little later, but um,

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<v Speaker 1>a large portion came in around the highs, and so

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<v Speaker 1>now this is the first time that they're seeing crypto

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<v Speaker 1>prices actually declined instead of just shoot straight up to

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<v Speaker 1>the move. And when you say a large portion, I

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<v Speaker 1>mean some of the stats I've seen cited or anything

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<v Speaker 1>between like fourty and sixty percent of the people who

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<v Speaker 1>hold bitcoin at least and certainly other tokens like ethereum

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<v Speaker 1>to your point, joined when things were really approaching or

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<v Speaker 1>hitting those old time highs. Yeah, that's h Some good

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<v Speaker 1>spens that I've seen are right around that, um, and

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<v Speaker 1>we've seen those people really struggle with what to do,

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<v Speaker 1>because when you're holding an asset and suddenly it's price drops.

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<v Speaker 1>You know, you have a couple of choices, and one

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<v Speaker 1>is to pull your money out, one is to hold

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<v Speaker 1>on and keep going. Um. And people are really grappling

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<v Speaker 1>with that decision right about now about which is the

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<v Speaker 1>best path to go on diamond hands or paper hans exactly.

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<v Speaker 1>And what we mean when we talk about diamond hands

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<v Speaker 1>and paper hands, right it's it's the idea that you

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<v Speaker 1>gotta you have to hold on for dear life, like

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<v Speaker 1>you shouldn't let go. And that's that's the diamond hands philosophy, Like,

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<v Speaker 1>no matter how brutal the crypto winter, you're going to

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<v Speaker 1>write it out because you believe that things are going

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<v Speaker 1>to go back up. And paper hands is a phrase

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<v Speaker 1>that's used in a pretty derogatory fashion. I find where

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<v Speaker 1>it's this idea that if you have to sell for

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<v Speaker 1>any reason, like maybe crypto just wasn't for you exactly.

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<v Speaker 1>And you know, unlike a lot of other traditional financial investing,

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<v Speaker 1>there's this intense community around crypto. No matter what coin

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<v Speaker 1>you're doing in any facet, usually you're part of an

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<v Speaker 1>Internet forum, um, whether that's Reddit or Twitter or discord.

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<v Speaker 1>So not only is that a question of seeing your

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<v Speaker 1>money invested suddenly drop. But there's this sort of peer

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<v Speaker 1>pressure to stay in in some cases to sell, but

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<v Speaker 1>in a lot of cases to stay in. And so

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<v Speaker 1>it's an extra sort of layer of your decision making

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<v Speaker 1>process because it's almost like your friends or people you've

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<v Speaker 1>gotten really close to online, are you know, pressuring you

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<v Speaker 1>in one direction or another? Yeah. And for many of

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<v Speaker 1>these of the people that I talked to that I'll

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<v Speaker 1>find on Twitter or on Reddit, I mean, their profile

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<v Speaker 1>is entirely based around crypto. So some of these people

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<v Speaker 1>have made it part of their personality. And then you know,

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<v Speaker 1>what are you gonna do? Give up? Especially when you've

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<v Speaker 1>integrated it so much into your life and your passions,

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<v Speaker 1>It gets really complicated, right. It's like those kind of

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<v Speaker 1>slightly sarcastic means that say things like liking coffee is

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<v Speaker 1>not a personality, um, But in this case, it's like,

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<v Speaker 1>in some cases, being pro a bitcoin is kind of

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<v Speaker 1>a personality for some of these folks. You've reported extensively,

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<v Speaker 1>possibly more than most reposes operating right now on the

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<v Speaker 1>collision of Internet culture and investing. Is there anything about

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<v Speaker 1>what's happening in crypto right now that is different from

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<v Speaker 1>what happened with meme stocks. Are the dynamics very similar, Like,

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<v Speaker 1>what are you noticing, I've noticing a lot more fear.

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<v Speaker 1>I think I'm noticing people really start to question in

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<v Speaker 1>some cases, what they're going to be doing moving forward.

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<v Speaker 1>I think with some of the meme stocks, it's I

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<v Speaker 1>won't say simple, but it's straightforward. It's you put money

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<v Speaker 1>into one stock and you watch it go up or down.

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<v Speaker 1>When you think of the crypto landscape, it's just that

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<v Speaker 1>it's a whole ecosystem um and there are people who

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<v Speaker 1>believe in the technology. A lot of people do, and

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<v Speaker 1>yet they're seeing the prices of their holdings really decline.

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<v Speaker 1>So there are a lot more layers to it. And

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<v Speaker 1>you know, despite both having an element of fun to it,

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<v Speaker 1>I think with a lot of meme stocks, people at

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<v Speaker 1>some level knew that they're worthless or that their value

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<v Speaker 1>is only caught up in other people's game of it.

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<v Speaker 1>Whereas with the crypto landscape, there is a lot of

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<v Speaker 1>a value of technological gains and people are having to

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<v Speaker 1>sort of sort out in what corners they want to

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<v Speaker 1>invest in, what is safe, what is not. It's it's

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<v Speaker 1>more nuanced and you know, nuance brings complexity and decision

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<v Speaker 1>fatigue and more room for peer pressure and stress, which

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<v Speaker 1>in in some of your reporting you talked about the

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<v Speaker 1>fact that this is starting to cause people to wonder

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<v Speaker 1>whether they want to switch back into the quote unquote

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<v Speaker 1>like real world exactly um and especially as we see

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<v Speaker 1>inflation really continue to be high and we see um

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<v Speaker 1>housing prices still very very high, warnings of a recession coming.

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<v Speaker 1>People are having to make some some tough choices about

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<v Speaker 1>where they're going to put their money and what they

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<v Speaker 1>do with it. And I think what option for people

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<v Speaker 1>who maybe have crypto holdings that have seen them go down.

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<v Speaker 1>Obviously it is just to stay in and you know,

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<v Speaker 1>see what happens. Which is easy to say if you're

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<v Speaker 1>okay without that money and just leaving it there. But

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<v Speaker 1>say for people who are suddenly facing increased bills in

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<v Speaker 1>other areas of their lives, they might need that money

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<v Speaker 1>and need to sell it a loss. So it with

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<v Speaker 1>the current economic environment, it makes everything a lot more

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<v Speaker 1>complicated for these investors, you know, and it also plays

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<v Speaker 1>into some of like the psychology of theories, like people

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<v Speaker 1>are really loss averse, like the idea of losing something

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<v Speaker 1>that we have is is really really challenging for us.

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<v Speaker 1>And so that tension between I don't want to turn

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<v Speaker 1>this paper loss into a real loss, but I also

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<v Speaker 1>need to pay my grocery bills. It feels very real.

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<v Speaker 1>It does. And that's one thing that I hear people

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<v Speaker 1>tell me is that it's not a loss until I sell,

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<v Speaker 1>and that is true. But at the same time, the

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<v Speaker 1>money you have access to has gone down if you

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<v Speaker 1>need it for an emergency or something. So and and

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<v Speaker 1>that being said, one of the challenges of reporting on

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<v Speaker 1>this space is that it's really difficult to find someone

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<v Speaker 1>who will admit a big loss to you. We'll be

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<v Speaker 1>right back with more from Bloomberg Reports to Clay about

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<v Speaker 1>in time on how investors are responding to this crypto winter.

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<v Speaker 1>I remember we were having a conversation over you know,

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<v Speaker 1>kind of before the November December holidays last year, and

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<v Speaker 1>you were talking about these folks who were gifting n

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<v Speaker 1>f T s or who were sitting around the their

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<v Speaker 1>dinner tables with their families, being like, you should get

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<v Speaker 1>into big coin right now. I wonder what those conversations

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<v Speaker 1>are like right now. I'm wondering that as well. And

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<v Speaker 1>I think you know, it's I think of how hard

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<v Speaker 1>that must be to have that conversation with your parents

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<v Speaker 1>or with your relatives that you've been talking this up,

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<v Speaker 1>and you know, like, like we've said, there's a lot

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<v Speaker 1>of nuance in it, but really it's difficult to um

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<v Speaker 1>admit that you've made a mistake or not even that

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<v Speaker 1>to sort of have the the value of your argument

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<v Speaker 1>go down at least right now, even if you believe

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<v Speaker 1>the coin is going higher. At least right now, it's

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<v Speaker 1>kind of hard to make a case that, you know,

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<v Speaker 1>all your relatives should invest in bitcoin. Is there you know,

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<v Speaker 1>in one of the stories that you wrote, you mentioned

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<v Speaker 1>a person in Canada who's a software engineer who got

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<v Speaker 1>out the last time. What's he up to these days?

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<v Speaker 1>And by the last time, I mean the last time

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<v Speaker 1>we experienced this kind of crypto ininto I mean for

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<v Speaker 1>people who have experienced this before, you know, it's a

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<v Speaker 1>whole another kind of of mindset. I think. So they're

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<v Speaker 1>they're thinking, is this, you know, how much can you

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<v Speaker 1>apply what you've learned in the past to what you

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<v Speaker 1>know now? And you know they're trying to take these lessons,

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<v Speaker 1>but like, like we've been talking about it is such

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<v Speaker 1>a different kind of environment than the last time. I mean,

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<v Speaker 1>you know, the crypto industry spans so many different corners

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<v Speaker 1>of the world, and also this we're in a really

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<v Speaker 1>interesting you know, are we or aren't we heading into

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<v Speaker 1>a into a recession type of environment? Um. So for

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<v Speaker 1>those who have exp are instant last time, I mean,

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<v Speaker 1>the temptation is a lot of the times too to

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<v Speaker 1>hang on. You know, they've they've said, we've been this,

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<v Speaker 1>through this before, and we're going to go higher from here. Um.

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<v Speaker 1>But it's it definitely gets harder as the losses, you know,

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<v Speaker 1>keep coming, even if those losses are just on paper. Yes, exactly.

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<v Speaker 1>All right, Well, Claire, thank you so much, and if

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<v Speaker 1>folks want to check out more of your reporting, they

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<v Speaker 1>can find you on the Bloomberg terminal, on Bloomberg dot

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<v Speaker 1>com and on Twitter as well. Your handle is CFB

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<v Speaker 1>Underscore A team, Yes, excellence. Thank you so much for

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<v Speaker 1>joining us. Thanks for having me on the next episode

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<v Speaker 1>of Bloomberg Crypto. As investors around the world are grappling

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<v Speaker 1>with the reality of sustained declines and prices across various

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<v Speaker 1>crypto markets, more people are asking the question what's next

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<v Speaker 1>and in some cases Who's Next Tomorrow. Bloomberg Report Emily

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<v Speaker 1>Nicole is interviewing Alston Zecca, partner at Global Venture on

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<v Speaker 1>eight Roads, for his perspective on how the crypto winter

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<v Speaker 1>is affecting sentiment and markets. I'm Stacy Marie Ishmael, and

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<v Speaker 1>this is Bloomberg Crypto, a daily podcast from Bloomberg and

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<v Speaker 1>I Heart Radio. For more shows from I Heart Radio,

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<v Speaker 1>visit the I Heart Radio app, Apple Podcasts, or wherever

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<v Speaker 1>you get your podcasts. Email your questions, comments or suggestions

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<v Speaker 1>for the show to Crypto at Bloomberg dot net and

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<v Speaker 1>you'll find us on Twitter at Crypto. The supervising producer

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<v Speaker 1>of Bloomberg Crypto is Vicky Vergalina. Our producer is Mohammed Peru.

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<v Speaker 1>Associate producer is zan Ab Sidiki. Desta wonder At is

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<v Speaker 1>our engineer. Original music by Leo Sidron