Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,
Speaker 1: and this is Bloomberg Crypto, a daily Bloomberg I Heard podcast.
Speaker 1: It's Monday, July eighteen. You could argue that crypto is
Speaker 1: no stranger to recession. In fact, it was the financial
Speaker 1: crisis of two thousand and eight that birthed the idea
Speaker 1: of bitcoin in the first place, But this recession is
Speaker 1: a little different. In the decade or so since that
Speaker 1: formative Bitcoin white paper, crypto has experienced spectacular growth, rising
Speaker 1: and then record prices have led to investor fomo fear
Speaker 1: of missing out. But now in the middle or maybe
Speaker 1: in the beginning of this crypto winter, investors who entered
Speaker 1: the digital asset class during that rising bullmarket period are
Speaker 1: reevaluating their entire relationships with digital assets. For more on
Speaker 1: this shift from fomo to oh No, joined by Bloomberg
Speaker 1: Reports to Claire A Balentine, Claire, so good to have
Speaker 1: you on the show. Thanks for having me. Not, however,
Speaker 1: so good for some of the folks listening to the
Speaker 1: show at the moment. Definitely not. It's been a tough
Speaker 1: time for crypto traders, especially the ones that are sort
Speaker 1: of new to the space. What's been going on exactly?
Speaker 1: I mean, obviously we've been covering pretty much every element
Speaker 1: of how crypto prices are declining, But why are retail
Speaker 1: investors right now really having a tough time? Yeah. So
Speaker 1: for a lot of the retail investors, UM, they piled
Speaker 1: in pretty recently to crypto. So you know, we saw
Speaker 1: prices peak in November of last year, and for many
Speaker 1: of them, that was right around when they jumped on.
Speaker 1: Maybe a little earlier, maybe a little later, but um,
Speaker 1: a large portion came in around the highs, and so
Speaker 1: now this is the first time that they're seeing crypto
Speaker 1: prices actually declined instead of just shoot straight up to
Speaker 1: the move. And when you say a large portion, I
Speaker 1: mean some of the stats I've seen cited or anything
Speaker 1: between like fourty and sixty percent of the people who
Speaker 1: hold bitcoin at least and certainly other tokens like ethereum
Speaker 1: to your point, joined when things were really approaching or
Speaker 1: hitting those old time highs. Yeah, that's h Some good
Speaker 1: spens that I've seen are right around that, um, and
Speaker 1: we've seen those people really struggle with what to do,
Speaker 1: because when you're holding an asset and suddenly it's price drops.
Speaker 1: You know, you have a couple of choices, and one
Speaker 1: is to pull your money out, one is to hold
Speaker 1: on and keep going. Um. And people are really grappling
Speaker 1: with that decision right about now about which is the
Speaker 1: best path to go on diamond hands or paper hans exactly.
Speaker 1: And what we mean when we talk about diamond hands
Speaker 1: and paper hands, right it's it's the idea that you
Speaker 1: gotta you have to hold on for dear life, like
Speaker 1: you shouldn't let go. And that's that's the diamond hands philosophy, Like,
Speaker 1: no matter how brutal the crypto winter, you're going to
Speaker 1: write it out because you believe that things are going
Speaker 1: to go back up. And paper hands is a phrase
Speaker 1: that's used in a pretty derogatory fashion. I find where
Speaker 1: it's this idea that if you have to sell for
Speaker 1: any reason, like maybe crypto just wasn't for you exactly.
Speaker 1: And you know, unlike a lot of other traditional financial investing,
Speaker 1: there's this intense community around crypto. No matter what coin
Speaker 1: you're doing in any facet, usually you're part of an
Speaker 1: Internet forum, um, whether that's Reddit or Twitter or discord.
Speaker 1: So not only is that a question of seeing your
Speaker 1: money invested suddenly drop. But there's this sort of peer
Speaker 1: pressure to stay in in some cases to sell, but
Speaker 1: in a lot of cases to stay in. And so
Speaker 1: it's an extra sort of layer of your decision making
Speaker 1: process because it's almost like your friends or people you've
Speaker 1: gotten really close to online, are you know, pressuring you
Speaker 1: in one direction or another? Yeah. And for many of
Speaker 1: these of the people that I talked to that I'll
Speaker 1: find on Twitter or on Reddit, I mean, their profile
Speaker 1: is entirely based around crypto. So some of these people
Speaker 1: have made it part of their personality. And then you know,
Speaker 1: what are you gonna do? Give up? Especially when you've
Speaker 1: integrated it so much into your life and your passions,
Speaker 1: It gets really complicated, right. It's like those kind of
Speaker 1: slightly sarcastic means that say things like liking coffee is
Speaker 1: not a personality, um, But in this case, it's like,
Speaker 1: in some cases, being pro a bitcoin is kind of
Speaker 1: a personality for some of these folks. You've reported extensively,
Speaker 1: possibly more than most reposes operating right now on the
Speaker 1: collision of Internet culture and investing. Is there anything about
Speaker 1: what's happening in crypto right now that is different from
Speaker 1: what happened with meme stocks. Are the dynamics very similar, Like,
Speaker 1: what are you noticing, I've noticing a lot more fear.
Speaker 1: I think I'm noticing people really start to question in
Speaker 1: some cases, what they're going to be doing moving forward.
Speaker 1: I think with some of the meme stocks, it's I
Speaker 1: won't say simple, but it's straightforward. It's you put money
Speaker 1: into one stock and you watch it go up or down.
Speaker 1: When you think of the crypto landscape, it's just that
Speaker 1: it's a whole ecosystem um and there are people who
Speaker 1: believe in the technology. A lot of people do, and
Speaker 1: yet they're seeing the prices of their holdings really decline.
Speaker 1: So there are a lot more layers to it. And
Speaker 1: you know, despite both having an element of fun to it,
Speaker 1: I think with a lot of meme stocks, people at
Speaker 1: some level knew that they're worthless or that their value
Speaker 1: is only caught up in other people's game of it.
Speaker 1: Whereas with the crypto landscape, there is a lot of
Speaker 1: a value of technological gains and people are having to
Speaker 1: sort of sort out in what corners they want to
Speaker 1: invest in, what is safe, what is not. It's it's
Speaker 1: more nuanced and you know, nuance brings complexity and decision
Speaker 1: fatigue and more room for peer pressure and stress, which
Speaker 1: in in some of your reporting you talked about the
Speaker 1: fact that this is starting to cause people to wonder
Speaker 1: whether they want to switch back into the quote unquote
Speaker 1: like real world exactly um and especially as we see
Speaker 1: inflation really continue to be high and we see um
Speaker 1: housing prices still very very high, warnings of a recession coming.
Speaker 1: People are having to make some some tough choices about
Speaker 1: where they're going to put their money and what they
Speaker 1: do with it. And I think what option for people
Speaker 1: who maybe have crypto holdings that have seen them go down.
Speaker 1: Obviously it is just to stay in and you know,
Speaker 1: see what happens. Which is easy to say if you're
Speaker 1: okay without that money and just leaving it there. But
Speaker 1: say for people who are suddenly facing increased bills in
Speaker 1: other areas of their lives, they might need that money
Speaker 1: and need to sell it a loss. So it with
Speaker 1: the current economic environment, it makes everything a lot more
Speaker 1: complicated for these investors, you know, and it also plays
Speaker 1: into some of like the psychology of theories, like people
Speaker 1: are really loss averse, like the idea of losing something
Speaker 1: that we have is is really really challenging for us.
Speaker 1: And so that tension between I don't want to turn
Speaker 1: this paper loss into a real loss, but I also
Speaker 1: need to pay my grocery bills. It feels very real.
Speaker 1: It does. And that's one thing that I hear people
Speaker 1: tell me is that it's not a loss until I sell,
Speaker 1: and that is true. But at the same time, the
Speaker 1: money you have access to has gone down if you
Speaker 1: need it for an emergency or something. So and and
Speaker 1: that being said, one of the challenges of reporting on
Speaker 1: this space is that it's really difficult to find someone
Speaker 1: who will admit a big loss to you. We'll be
Speaker 1: right back with more from Bloomberg Reports to Clay about
Speaker 1: in time on how investors are responding to this crypto winter.
Speaker 1: I remember we were having a conversation over you know,
Speaker 1: kind of before the November December holidays last year, and
Speaker 1: you were talking about these folks who were gifting n
Speaker 1: f T s or who were sitting around the their
Speaker 1: dinner tables with their families, being like, you should get
Speaker 1: into big coin right now. I wonder what those conversations
Speaker 1: are like right now. I'm wondering that as well. And
Speaker 1: I think you know, it's I think of how hard
Speaker 1: that must be to have that conversation with your parents
Speaker 1: or with your relatives that you've been talking this up,
Speaker 1: and you know, like, like we've said, there's a lot
Speaker 1: of nuance in it, but really it's difficult to um
Speaker 1: admit that you've made a mistake or not even that
Speaker 1: to sort of have the the value of your argument
Speaker 1: go down at least right now, even if you believe
Speaker 1: the coin is going higher. At least right now, it's
Speaker 1: kind of hard to make a case that, you know,
Speaker 1: all your relatives should invest in bitcoin. Is there you know,
Speaker 1: in one of the stories that you wrote, you mentioned
Speaker 1: a person in Canada who's a software engineer who got
Speaker 1: out the last time. What's he up to these days?
Speaker 1: And by the last time, I mean the last time
Speaker 1: we experienced this kind of crypto ininto I mean for
Speaker 1: people who have experienced this before, you know, it's a
Speaker 1: whole another kind of of mindset. I think. So they're
Speaker 1: they're thinking, is this, you know, how much can you
Speaker 1: apply what you've learned in the past to what you
Speaker 1: know now? And you know they're trying to take these lessons,
Speaker 1: but like, like we've been talking about it is such
Speaker 1: a different kind of environment than the last time. I mean,
Speaker 1: you know, the crypto industry spans so many different corners
Speaker 1: of the world, and also this we're in a really
Speaker 1: interesting you know, are we or aren't we heading into
Speaker 1: a into a recession type of environment? Um. So for
Speaker 1: those who have exp are instant last time, I mean,
Speaker 1: the temptation is a lot of the times too to
Speaker 1: hang on. You know, they've they've said, we've been this,
Speaker 1: through this before, and we're going to go higher from here. Um.
Speaker 1: But it's it definitely gets harder as the losses, you know,
Speaker 1: keep coming, even if those losses are just on paper. Yes, exactly.
Speaker 1: All right, Well, Claire, thank you so much, and if
Speaker 1: folks want to check out more of your reporting, they
Speaker 1: can find you on the Bloomberg terminal, on Bloomberg dot
Speaker 1: com and on Twitter as well. Your handle is CFB
Speaker 1: Underscore A team, Yes, excellence. Thank you so much for
Speaker 1: joining us. Thanks for having me on the next episode
Speaker 1: of Bloomberg Crypto. As investors around the world are grappling
Speaker 1: with the reality of sustained declines and prices across various
Speaker 1: crypto markets, more people are asking the question what's next
Speaker 1: and in some cases Who's Next Tomorrow. Bloomberg Report Emily
Speaker 1: Nicole is interviewing Alston Zecca, partner at Global Venture on
Speaker 1: eight Roads, for his perspective on how the crypto winter
Speaker 1: is affecting sentiment and markets. I'm Stacy Marie Ishmael, and
Speaker 1: this is Bloomberg Crypto, a daily podcast from Bloomberg and
Speaker 1: I Heart Radio. For more shows from I Heart Radio,
Speaker 1: visit the I Heart Radio app, Apple Podcasts, or wherever
Speaker 1: you get your podcasts. Email your questions, comments or suggestions
Speaker 1: for the show to Crypto at Bloomberg dot net and
Speaker 1: you'll find us on Twitter at Crypto. The supervising producer
Speaker 1: of Bloomberg Crypto is Vicky Vergalina. Our producer is Mohammed Peru.
Speaker 1: Associate producer is zan Ab Sidiki. Desta wonder At is
Speaker 1: our engineer. Original music by Leo Sidron