1
00:00:02,680 --> 00:00:05,760
Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I heard podcast,

2
00:00:05,920 --> 00:00:08,720
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for

3
00:00:08,720 --> 00:00:26,640
Speaker 1: Bloomberg News. It's Monday, December twelve. What do pandemic stimulus

4
00:00:26,680 --> 00:00:29,720
Speaker 1: funds a k a. Stimmy checks have to do with

5
00:00:29,720 --> 00:00:32,720
Speaker 1: the recent collapse of crypto prices and of entities like

6
00:00:32,800 --> 00:00:36,920
Speaker 1: ft X. According to Bloomberg opinion writer Robert Burgess, also

7
00:00:36,920 --> 00:00:40,879
Speaker 1: known as Bob, the answer is basically everything. As he

8
00:00:40,920 --> 00:00:44,280
Speaker 1: wrote in a recent column, and I quote, when historians

9
00:00:44,320 --> 00:00:47,239
Speaker 1: look back on the spectacular rise and collapse of the

10
00:00:47,240 --> 00:00:51,320
Speaker 1: cryptocurrency market, they will conclude that it couldn't have happened

11
00:00:51,440 --> 00:00:54,560
Speaker 1: without the pandemic, and they'd be right. Is this a

12
00:00:54,560 --> 00:00:59,120
Speaker 1: controversial opinion? People were sitting on a lot of cash

13
00:00:59,360 --> 00:01:01,840
Speaker 1: and not I think anything to do so A lot

14
00:01:01,880 --> 00:01:04,760
Speaker 1: of this money had to go somewhere, and I believe that,

15
00:01:04,920 --> 00:01:08,920
Speaker 1: you know, crypto was a natural outlet for more. Bob

16
00:01:09,040 --> 00:01:22,840
Speaker 1: joins us. Now, Bob, welcome to the podcast. Thank you

17
00:01:22,840 --> 00:01:27,560
Speaker 1: for owning me an absolute pleasure. I couldn't resist quoting

18
00:01:28,440 --> 00:01:32,920
Speaker 1: your column in which you sort of attributed at least

19
00:01:33,000 --> 00:01:35,800
Speaker 1: one of the causes for the current collapse in the

20
00:01:35,800 --> 00:01:41,959
Speaker 1: crypto market too easy money? Can you say more about that? Yeah,

21
00:01:42,000 --> 00:01:47,240
Speaker 1: when all this went down, um, starting earlier this month

22
00:01:47,319 --> 00:01:52,040
Speaker 1: in November, I wanted to put the crash in the

23
00:01:52,120 --> 00:01:56,240
Speaker 1: crypto markets and the bankruptcy of f t X into

24
00:01:56,760 --> 00:02:00,480
Speaker 1: a bit of a long term context, And to me,

25
00:02:01,480 --> 00:02:06,400
Speaker 1: it was as plain as day that the the rise

26
00:02:06,720 --> 00:02:11,079
Speaker 1: of cryptol and the speculative excesses that we've seen were

27
00:02:11,080 --> 00:02:15,240
Speaker 1: a direct result of more than a dozen years of

28
00:02:15,600 --> 00:02:19,919
Speaker 1: easy money policies. And you know, more than a dozen years.

29
00:02:20,000 --> 00:02:23,720
Speaker 1: That's sort of going back to what my friends and

30
00:02:23,760 --> 00:02:26,600
Speaker 1: e con like to talk about in terms of quantitative easing,

31
00:02:27,000 --> 00:02:29,320
Speaker 1: which whenever I asked them to define it, they kind

32
00:02:29,320 --> 00:02:32,680
Speaker 1: of runaway. So I'm going to ask you to just

33
00:02:32,760 --> 00:02:37,320
Speaker 1: explain exactly what that is. Sure, I guess you just

34
00:02:37,760 --> 00:02:39,960
Speaker 1: for a little bit of a preamble. You know, coming

35
00:02:40,120 --> 00:02:43,880
Speaker 1: out of the financial crisis of two thousand and eight

36
00:02:43,880 --> 00:02:48,480
Speaker 1: and two thousand nine, when the financial system um basically

37
00:02:48,680 --> 00:02:54,079
Speaker 1: seized up, the Federal Reserve and other central banks essentially

38
00:02:54,600 --> 00:02:59,440
Speaker 1: started printing money that they can inject directly into the

39
00:02:59,480 --> 00:03:03,040
Speaker 1: financial shole system so that the plumbing of the financial

40
00:03:03,120 --> 00:03:06,280
Speaker 1: system kept running. I mean, we were very close to

41
00:03:06,360 --> 00:03:08,920
Speaker 1: you walking up to your local A T M and

42
00:03:09,040 --> 00:03:11,920
Speaker 1: not having any money spit out of it. That's how

43
00:03:12,040 --> 00:03:16,280
Speaker 1: severe that episode was. And the way the central banks

44
00:03:16,320 --> 00:03:20,200
Speaker 1: do this is, you know, they basically create money and

45
00:03:20,480 --> 00:03:25,639
Speaker 1: by bonds and of our financial assets, and that that

46
00:03:25,760 --> 00:03:28,720
Speaker 1: money that they used to purchase those assets go right

47
00:03:28,800 --> 00:03:34,440
Speaker 1: into the financial system. And to use the phrase from

48
00:03:34,480 --> 00:03:37,440
Speaker 1: your column you wrote, you know, the financial system was

49
00:03:37,520 --> 00:03:41,040
Speaker 1: overwhelmed with cash in a remarkably short period of time.

50
00:03:41,840 --> 00:03:45,280
Speaker 1: Citing that data point that you've just shared, draw a

51
00:03:45,320 --> 00:03:48,320
Speaker 1: picture for me of how we get from you know,

52
00:03:48,480 --> 00:03:50,960
Speaker 1: central banks trying to bail out the financial system in

53
00:03:51,000 --> 00:03:56,160
Speaker 1: a crisis, to crypto prices going higher and then lower. Yeah.

54
00:03:56,160 --> 00:03:59,440
Speaker 1: I think that at the beginning of the pandemic UM,

55
00:03:59,640 --> 00:04:04,840
Speaker 1: when economies around the world were locked down, that's when

56
00:04:05,560 --> 00:04:10,560
Speaker 1: UM things really picked up. Central banks UM increased their

57
00:04:10,720 --> 00:04:15,680
Speaker 1: level of quantitative easing, and governments were forced to do

58
00:04:16,040 --> 00:04:21,560
Speaker 1: some level of fiscal stimulus, whether it's through the loans

59
00:04:21,800 --> 00:04:24,760
Speaker 1: that the government gave businesses to see them through the

60
00:04:24,839 --> 00:04:29,520
Speaker 1: tough times, or whether it was the extra unemployment benefits

61
00:04:29,800 --> 00:04:33,040
Speaker 1: UM that the governments were giving laid off workers and

62
00:04:33,120 --> 00:04:37,080
Speaker 1: sometimes you know, even direct payments. We went the global

63
00:04:37,680 --> 00:04:43,279
Speaker 1: money supply of the US, China, Eurozone, Japan and eight

64
00:04:43,320 --> 00:04:48,320
Speaker 1: other major developed economies searched by twenty one point five

65
00:04:48,600 --> 00:04:55,120
Speaker 1: trillion dollars over one as governments and central banks trying

66
00:04:55,120 --> 00:04:58,920
Speaker 1: to say their economies and that the money supply went

67
00:04:58,920 --> 00:05:01,600
Speaker 1: to hundred two trillion, It just wants to have just

68
00:05:01,640 --> 00:05:05,520
Speaker 1: to put that in context. That one trillion of cash

69
00:05:05,680 --> 00:05:08,320
Speaker 1: and that was created over those two years was more

70
00:05:09,000 --> 00:05:11,200
Speaker 1: than the previous seven years combined. It was just a

71
00:05:11,200 --> 00:05:13,560
Speaker 1: tremendous amount of money going into the financial system in

72
00:05:13,600 --> 00:05:18,000
Speaker 1: a very short period of time. So you've got a

73
00:05:18,080 --> 00:05:22,200
Speaker 1: fair amount of discretionary income, right, You know, people are

74
00:05:22,240 --> 00:05:25,080
Speaker 1: able to meet their basic needs. Also, they couldn't really

75
00:05:25,120 --> 00:05:27,880
Speaker 1: go outside and do stuff, so they were looking for

76
00:05:27,920 --> 00:05:29,960
Speaker 1: needs that you know, we were looking for needs that

77
00:05:30,000 --> 00:05:35,240
Speaker 1: we could meet from lockdown. Your your premise is that

78
00:05:35,360 --> 00:05:41,600
Speaker 1: at least some of that additional discretionary income flowed into cryptocurrencies. Yeah,

79
00:05:41,680 --> 00:05:44,160
Speaker 1: it wasn't just discretionary income. I mean, just look at

80
00:05:44,200 --> 00:05:46,560
Speaker 1: it another way. Just using the United States as a

81
00:05:46,560 --> 00:05:50,719
Speaker 1: specific example, A columnists look at something called excess savings,

82
00:05:50,720 --> 00:05:52,760
Speaker 1: which is basically just money that you have in your

83
00:05:52,800 --> 00:05:58,840
Speaker 1: savings account UM. Usually that stands out around one to

84
00:05:59,080 --> 00:06:02,760
Speaker 1: five trained lars, and it's been pretty steady, you know,

85
00:06:02,839 --> 00:06:06,760
Speaker 1: over the last ten years leading into but because of

86
00:06:06,800 --> 00:06:11,680
Speaker 1: all these programs, that number that excess savings that people

87
00:06:11,800 --> 00:06:16,360
Speaker 1: have in their checking accounts shot up to four point

88
00:06:16,480 --> 00:06:22,039
Speaker 1: five trillion dollars from one point to so people were

89
00:06:22,120 --> 00:06:25,520
Speaker 1: sitting on a lot of cash and not having anything

90
00:06:25,560 --> 00:06:27,960
Speaker 1: to do, not not being able to do anything with it.

91
00:06:28,400 --> 00:06:30,920
Speaker 1: So what they did is it was like, well, let's

92
00:06:31,040 --> 00:06:34,040
Speaker 1: invest this money. They're not going to go into bonds

93
00:06:34,080 --> 00:06:37,280
Speaker 1: because bonds are paying nothing at the time, right, you know,

94
00:06:37,760 --> 00:06:41,440
Speaker 1: just consider that we had eighteen trillion dollars of bonds

95
00:06:41,440 --> 00:06:44,760
Speaker 1: that actually paid negative fields, right, maybe that you're paying

96
00:06:44,800 --> 00:06:49,359
Speaker 1: governments to allars your money. Stock prices UM stock values

97
00:06:49,480 --> 00:06:52,119
Speaker 1: were at record highs, So a lot of this money

98
00:06:52,120 --> 00:06:54,800
Speaker 1: had to go somewhere, and I believe that, you know,

99
00:06:54,920 --> 00:06:58,680
Speaker 1: crypto was a natural outlet. And I think you can

100
00:06:58,720 --> 00:07:02,880
Speaker 1: see that in some of the data about the crypto industry.

101
00:07:03,000 --> 00:07:08,480
Speaker 1: Right we went from less than three thousand crypto currencies

102
00:07:09,120 --> 00:07:15,200
Speaker 1: in two thousand nineteen two over ten that's an amazing

103
00:07:15,200 --> 00:07:19,080
Speaker 1: amount of growth. Well as We've reported both my as

104
00:07:19,120 --> 00:07:21,240
Speaker 1: my colleagues of reports, and we've mentioned in this podcast

105
00:07:21,720 --> 00:07:23,440
Speaker 1: most of those tokens are what we would call like

106
00:07:23,520 --> 00:07:26,200
Speaker 1: zombie coins, right like, they don't they don't super trade,

107
00:07:26,240 --> 00:07:30,600
Speaker 1: they're not particularly liquid. Their market value is in the

108
00:07:30,960 --> 00:07:34,920
Speaker 1: tens of dollars of the hundreds of dollars in some cases. Um,

109
00:07:34,960 --> 00:07:38,680
Speaker 1: but I'm interested in this because you know, I can't

110
00:07:38,680 --> 00:07:40,600
Speaker 1: remember affectiated on this on the show. So if it's

111
00:07:40,640 --> 00:07:43,760
Speaker 1: the first time, welcome to everybody. I've long had a

112
00:07:43,880 --> 00:07:49,480
Speaker 1: theory that there is an impulse shared by certain kinds

113
00:07:49,480 --> 00:07:52,840
Speaker 1: of speculators in crypto, which is similar to the energy

114
00:07:52,880 --> 00:07:56,320
Speaker 1: we store around like meme stocks that we see in

115
00:07:56,520 --> 00:07:59,800
Speaker 1: online betting in sports betting, where it's a combination of

116
00:08:00,480 --> 00:08:04,240
Speaker 1: I have some excess savings. As you say, there, this

117
00:08:04,320 --> 00:08:08,720
Speaker 1: is fun, risk is fun. These returns seem interesting. There's

118
00:08:08,720 --> 00:08:11,720
Speaker 1: a community around this, you know, whether it's a message

119
00:08:11,720 --> 00:08:14,560
Speaker 1: board or a Reddit group or like an athlete telling

120
00:08:14,560 --> 00:08:18,760
Speaker 1: you should buy bitcoin. So do you think that the

121
00:08:18,920 --> 00:08:22,800
Speaker 1: move into crypto was going to happen kind of anyway

122
00:08:22,800 --> 00:08:24,760
Speaker 1: because it was an asset class that was attracting attention

123
00:08:24,840 --> 00:08:31,280
Speaker 1: or was there anything about one that induced more people

124
00:08:31,320 --> 00:08:35,280
Speaker 1: than you might expect in that direction. In my column,

125
00:08:35,320 --> 00:08:37,520
Speaker 1: I think it was pretty clearness sense that I didn't

126
00:08:37,559 --> 00:08:41,600
Speaker 1: think that we would have seen all the excesses that

127
00:08:41,679 --> 00:08:46,600
Speaker 1: we did in the crypto market over and by the way,

128
00:08:46,720 --> 00:08:49,400
Speaker 1: and another financial assets as well, right, whether it be

129
00:08:49,760 --> 00:08:53,040
Speaker 1: the stock market which had a tremendous run, whether it

130
00:08:53,080 --> 00:08:58,040
Speaker 1: be in housing right, which had a tremendous run, prices

131
00:08:58,160 --> 00:09:03,520
Speaker 1: rising um much more than they have been historically, and

132
00:09:03,559 --> 00:09:07,520
Speaker 1: crypto was just part of that, right, And so you know,

133
00:09:07,559 --> 00:09:10,559
Speaker 1: what happened in the crypto market didn't happen in isolation.

134
00:09:11,280 --> 00:09:15,760
Speaker 1: It was also happening in conjunction with what we were

135
00:09:15,760 --> 00:09:20,120
Speaker 1: seeing in other financial assets. So I think that you know,

136
00:09:20,320 --> 00:09:24,200
Speaker 1: if the pandemic didn't come along, if the central banks

137
00:09:24,200 --> 00:09:28,360
Speaker 1: didn't ramp up their easy money policies, you know, if

138
00:09:28,559 --> 00:09:34,199
Speaker 1: the governments did not um start pumping twis dollars into

139
00:09:34,360 --> 00:09:37,600
Speaker 1: the economy through physical stimulus, we probably wouldn't have seen

140
00:09:37,800 --> 00:09:45,440
Speaker 1: what we saw in the crypto market over twenty We'll

141
00:09:45,440 --> 00:09:59,440
Speaker 1: be right back with more from Bloomberg's Bob Burgess. Now

142
00:09:59,640 --> 00:10:02,720
Speaker 1: one of your charts, because we love a chart for Bloomberg.

143
00:10:03,679 --> 00:10:06,160
Speaker 1: One of the charts in your column pointed out the

144
00:10:06,200 --> 00:10:10,720
Speaker 1: fact that as interest rates started rising, crypto prices started fulling.

145
00:10:11,160 --> 00:10:13,240
Speaker 1: So there's kind of a clear correlation there. But what

146
00:10:13,360 --> 00:10:15,400
Speaker 1: for you is the causation. Was it that people were like, oh,

147
00:10:15,480 --> 00:10:18,680
Speaker 1: bonds suddenly seem more attractive. Is there really an investor

148
00:10:18,679 --> 00:10:21,120
Speaker 1: who's like, choices are between bitcoin and bonds or was

149
00:10:21,160 --> 00:10:24,280
Speaker 1: something else going on here? Yeah? I think it's a

150
00:10:24,520 --> 00:10:28,120
Speaker 1: sort of a combination of of all that. You know,

151
00:10:28,160 --> 00:10:32,839
Speaker 1: it's in markets, it's always impossible to you know, boil

152
00:10:32,920 --> 00:10:36,840
Speaker 1: it down to one sort of comment denominator. But a

153
00:10:36,920 --> 00:10:40,040
Speaker 1: big thing I think is just, you know, the the

154
00:10:40,160 --> 00:10:44,240
Speaker 1: issue of alternatives, right. I mean, you know, there was

155
00:10:44,320 --> 00:10:49,560
Speaker 1: this acronym um that was invented called tina t I

156
00:10:49,760 --> 00:10:53,200
Speaker 1: n A. There is no alternative to stocks, right, and

157
00:10:53,280 --> 00:10:56,400
Speaker 1: that's why we saw the big, you know, surge in

158
00:10:56,480 --> 00:10:59,280
Speaker 1: the stock market because people didn't want to buy bonds.

159
00:11:00,040 --> 00:11:02,280
Speaker 1: Is the contre paying nothing? You know, you can go

160
00:11:02,320 --> 00:11:05,000
Speaker 1: to your bank and you can look at your past

161
00:11:05,040 --> 00:11:07,920
Speaker 1: book savings account and you're getting just a couple of

162
00:11:08,000 --> 00:11:11,760
Speaker 1: basis points and the same thing on certificates of deposit.

163
00:11:11,800 --> 00:11:14,079
Speaker 1: They were paying nothing, And where else were you going

164
00:11:14,120 --> 00:11:17,400
Speaker 1: to put your money right, and but now that's starting

165
00:11:17,440 --> 00:11:20,640
Speaker 1: to turn a bent, Right, there are alternatives. You just

166
00:11:20,720 --> 00:11:24,760
Speaker 1: look at the lowly treasury bills, right, you can give

167
00:11:24,840 --> 00:11:29,280
Speaker 1: your money to the government for three months and get

168
00:11:29,280 --> 00:11:32,679
Speaker 1: a four percent um rate of return on that. That's

169
00:11:33,000 --> 00:11:36,600
Speaker 1: pretty attractive, you know, um, And you know, I think

170
00:11:36,600 --> 00:11:39,520
Speaker 1: that's drawing a lot of money, um, you know out

171
00:11:39,520 --> 00:11:41,840
Speaker 1: of the crypto market and out of the stock market

172
00:11:41,880 --> 00:11:44,200
Speaker 1: and some of these other places where we see it existence.

173
00:11:46,440 --> 00:11:50,080
Speaker 1: Given that premise, do you think, in the unlikely event

174
00:11:50,080 --> 00:11:52,480
Speaker 1: that interest rates are going to like fall dramatically anytime soon,

175
00:11:53,160 --> 00:11:55,920
Speaker 1: that where we are with crypto is like where it's

176
00:11:55,960 --> 00:11:59,360
Speaker 1: likely to sort of persist. You know that that's a

177
00:11:59,360 --> 00:12:02,160
Speaker 1: good question. I I have. I have no idea what

178
00:12:03,040 --> 00:12:05,319
Speaker 1: happened in the crypto market. I mean, if you look

179
00:12:05,360 --> 00:12:07,680
Speaker 1: at the history you know of the crypto market going

180
00:12:07,720 --> 00:12:10,680
Speaker 1: back to two thousand, you know, six and seven, you

181
00:12:10,720 --> 00:12:15,720
Speaker 1: know there's a history of tremendous booms and busts, and

182
00:12:16,040 --> 00:12:19,080
Speaker 1: you know you can't rule that out happening again. But

183
00:12:19,120 --> 00:12:22,920
Speaker 1: I think would also, you know, come down to if

184
00:12:22,960 --> 00:12:26,440
Speaker 1: interest rates do start to decline, why are they declining? Right?

185
00:12:26,480 --> 00:12:31,080
Speaker 1: I mean, are they declining because we've beaten inflation, or

186
00:12:31,320 --> 00:12:36,280
Speaker 1: we declining because the economy is just in such horrible

187
00:12:36,280 --> 00:12:39,040
Speaker 1: shape that we're in a deep procession. You know, if

188
00:12:39,080 --> 00:12:41,520
Speaker 1: it's the ladder is the case, then I think people

189
00:12:41,559 --> 00:12:43,320
Speaker 1: are going to hunker down and not going to be

190
00:12:43,400 --> 00:12:48,400
Speaker 1: looking at um making sort of uh, looking at speculative

191
00:12:48,440 --> 00:12:52,280
Speaker 1: assets to put their money. They'll look to save it. Well, Bob,

192
00:12:52,280 --> 00:12:53,880
Speaker 1: thank you so much for taking this time to during

193
00:12:53,920 --> 00:12:56,440
Speaker 1: the podcast today. I really appreciate it. Thank you for

194
00:12:56,440 --> 00:12:59,720
Speaker 1: having me. You can find more of his work on

195
00:12:59,720 --> 00:13:02,880
Speaker 1: the work terminal and on Bloomberg dot com, and if

196
00:13:02,920 --> 00:13:04,800
Speaker 1: you feel so moved, you can check out our twice

197
00:13:04,840 --> 00:13:13,720
Speaker 1: weekly newsletter, which is called Bloomberg Crypto. This is Bloomberg Crypto,

198
00:13:13,920 --> 00:13:17,240
Speaker 1: a daily podcast from Bloomberg and I Heart Radio. For

199
00:13:17,320 --> 00:13:19,520
Speaker 1: more shows from I Heart Radio, visit the I Heart

200
00:13:19,600 --> 00:13:23,319
Speaker 1: Radio app, Apple Podcasts, or wherever you get your podcasts.

201
00:13:24,120 --> 00:13:26,680
Speaker 1: Send us your comments, questions or suggestions for the show

202
00:13:26,880 --> 00:13:33,040
Speaker 1: to Crypto at Bloomberg dot net. The supervising producer of

203
00:13:33,040 --> 00:13:36,480
Speaker 1: Bloomberg Crypto is Vicky very Galina. Our senior producer is

204
00:13:36,559 --> 00:13:40,319
Speaker 1: Janet Babin. Our producers are Mohammed Farouk and Sharon Burriro.

205
00:13:40,840 --> 00:13:44,560
Speaker 1: Our associate producers are Ty Butler and Moses on Them.

206
00:13:44,640 --> 00:13:48,600
Speaker 1: Desta wonder At is our engineer. Original music by Leo Sidron.

207
00:13:50,200 --> 00:14:02,640
Speaker 1: I'm Stacy Marie Schmall. We'll be back tomorrow. Sat at everything,

208
00:14:02,720 --> 00:14:04,360
Speaker 1: sad in a widing side