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Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Hood podcast,

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Speaker 1: and I'm Vodana hi in today for Stacy Marie Ishmael.

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Speaker 1: It's Tuesday, December. For the last six months or so,

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Speaker 1: the digital assets industry has been knee deep in the

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Speaker 1: trenches of a crypto winter, and now the demise of

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Speaker 1: Sam brankun Fried's f t X and Alameter Research have

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Speaker 1: produced a dramatic decline in market liquidity. And while these

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Speaker 1: bankruptcies will take years to be resolved in the court system,

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Speaker 1: the effects of the collapse in the market have been immediate.

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Speaker 1: Investors and traders are only just beginning to grapple with

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Speaker 1: the consequences. And joining us now to talk about this

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Speaker 1: and more is Bloomberg reporter Katie Greifeld. The fact that

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Speaker 1: liquidity is drying up and we're still range bound, I

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Speaker 1: would think would make people a little bit nervous. M okay, Katie,

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Speaker 1: just to start, maybe you can lay out for us

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Speaker 1: what actually is happening in crypto markets right now now

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Speaker 1: that we've seen f t X and Alameda fold. It

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Speaker 1: depends on what part of the crypto industry you're looking at.

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Speaker 1: I mean, if you're looking at the company corporate side

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Speaker 1: of things. Obviously everyone is on bankruptcy watch, just looking

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Speaker 1: for the continued fallout there from the fall of SPFS empire.

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Speaker 1: If you're looking at the trading side, doesn't seem like

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Speaker 1: too much is happening. And if you're looking at the

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Speaker 1: price of the coins themselves, I mean, bitcoin is just

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Speaker 1: absolutely glued to its range. So again, it feels like

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Speaker 1: a lot is happening in terms of the companies the

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Speaker 1: people involved, but in the actual market itself it's a

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Speaker 1: little bit dull. I heard you were doing a lot

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Speaker 1: of yellow trading. I'm not white. I think that obscure

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Speaker 1: coins those they have a name, you know, we can't

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Speaker 1: say it on the right. Yeah, the the s coins, Uh,

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Speaker 1: someone's doing it, but far less than years previous. Yeah.

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Speaker 1: So what about in terms of market liquidity, Maybe let's

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Speaker 1: start out with a definition of what actually liquidity is,

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Speaker 1: because people are always talking about how the bond market

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Speaker 1: it doesn't have liquidity, liquidity is running dry here and there.

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Speaker 1: So what specifically are we talking about when we're talking

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Speaker 1: about the crypto market. I think that's an important point

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Speaker 1: that liquidity is sort of this nebulous phrase that's thrown

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Speaker 1: about in every single asset class. You have heard a

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Speaker 1: lot about treasury market liquidity this year. Some people joke

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Speaker 1: that people blame liquidity issues when they just can't get

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Speaker 1: the price they want. But there was a report out

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Speaker 1: from Kaiko which I thought was really interesting. They laid

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Speaker 1: out their methodology for how they measure liquidity in crypto

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Speaker 1: and I liked this. They basically calculate the quantity of

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Speaker 1: bids and asks within two percent of the mid price

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Speaker 1: for a token trading on an exchange. So they looked

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Speaker 1: at that for Bitcoin, for tether across centralized exchanges and

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Speaker 1: they found that actually liquidity there dropped to its lowest

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Speaker 1: level since June in November. So yeah, yeah, a bit

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Speaker 1: of a drying up there, and it's all as a

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Speaker 1: result of what happened with f t X and Alameda. Right,

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Speaker 1: so liquidity is drying up in crypto markets, meaning that

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Speaker 1: people are just having a harder time buying and setting

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Speaker 1: things right exactly. They actually called it the Alimated gap.

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Speaker 1: Great name, It is a great name, and it really

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Speaker 1: speaks to what's going on, is that you have this

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Speaker 1: big reduction in risk appetite following that huge implosion. We

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Speaker 1: saw that basically, the market makers, trading shops in general,

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Speaker 1: they're pulling back their bids and their asks because they

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Speaker 1: want to regulate risk. Here, there's a big rethink on

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Speaker 1: what people's risk physicians look like, and you're seeing that

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Speaker 1: filter out in some of these liquidity measures. So when

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Speaker 1: we are talking to some of these market makers, can

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Speaker 1: we maybe say that there are some positive developments as

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Speaker 1: a result where I think they're telling us that they're

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Speaker 1: just being much more prudent in terms of who and

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Speaker 1: what they're actually trading with. So I think, I mean,

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Speaker 1: it'd be easy to maybe look at the explanation that

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Speaker 1: Kaiko lays out that basically these trading shops are regulating

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Speaker 1: their risk more prudently and say that's a good thing.

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Speaker 1: I guess the bad thing or the potential risk here

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Speaker 1: is that why is low liquidity bad? It's because, well,

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Speaker 1: you can't necessarily trade at the price that you would

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Speaker 1: like to, and because of that, you could see even

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Speaker 1: bigger swings in the market if there were a big

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Speaker 1: order to go through that has much more potential to

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Speaker 1: cause a bigger swing than would be expected in a

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Speaker 1: normal liquidity environment. Obviously, it doesn't seem like we have

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Speaker 1: seen that yet when you just look at the price

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Speaker 1: of bitcoin glued in that sixteen thousand to seventeen thousand

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Speaker 1: dollar range. But the fact that liquidity is drying up

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Speaker 1: and we're still range bound, I would think would make

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Speaker 1: people a little bit nervous. Let's talk about that range.

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Speaker 1: So over this summer and for much of this year,

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Speaker 1: bitquin was around twenty thousand dollars. Now it's much closer

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Speaker 1: to seventeen thousand dollars, And I wonder if you think

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Speaker 1: seventeen thousand is the new twenty thousand. It's a good question.

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Speaker 1: I mean, it is interesting just in the past a

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Speaker 1: few weeks that seventeen thousand has become the new sixteen thousand.

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Speaker 1: For example, for so long we were glued to sixteen thousand.

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Speaker 1: This market does seem to like roundish numbers for better worse,

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Speaker 1: we tend to like gravitate towards these sixteen or seventeen

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Speaker 1: or twenty handles. In terms of why that's the floor,

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Speaker 1: I wish I knew, but we know that if you

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Speaker 1: look at some of the exchange traded product data, for example,

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Speaker 1: that there really hasn't been any selling. It feels like

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Speaker 1: the marginal seller has just been flushed out of this market.

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Speaker 1: Left is probably true believers and some of those so

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Speaker 1: called whales, and they'll be sticking around. One would assume.

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Speaker 1: So if you bought it a hundred dollars, you're probably okay,

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Speaker 1: you're happy, still maybe not happy. Up next more with

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Speaker 1: Bloomberg reporter Katie Greifeld. We'll be right back. So we

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Speaker 1: have Bitcoin hovering around seventeen thousand dollars. One interesting thing

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Speaker 1: that's happened recently is that it's dominance actually within the

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Speaker 1: market as a as its share of the market hasn't

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Speaker 1: been going up, which is unusual because in the past

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Speaker 1: when we've had sell offs, its dominance has tended to

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Speaker 1: go up because more people are gravitating towards the coin,

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Speaker 1: you know, as quote unquote safer a place within crypto

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Speaker 1: itself because it's the original, it's the largest, etcetera. Can

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Speaker 1: you talk about this and why this is a bad sign. Yeah,

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Speaker 1: this is one of the interesting quirks in this range

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Speaker 1: that we've been watching in bitcoin. To your point, bitcoin

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Speaker 1: is like the haven of the cryptocurrencies. It's been around

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Speaker 1: the longest, most liquid, largest market cap. The list goes on,

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Speaker 1: But like you said, I mean it's share of the

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Speaker 1: total cryptocurrency market, which total market values somewhere under a

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Speaker 1: trillion dollars right now, but Bitcoin's shares about forty percent.

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Speaker 1: That number was about eighty percent. Obviously is more coins

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Speaker 1: have proliferated in the market that has naturally gone down,

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Speaker 1: but typically in times of turmoil, you do see its

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Speaker 1: share of the market go up as investors basically flocked

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Speaker 1: to this to ride out the storm. The fact that

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Speaker 1: that hasn't happened there was actually a great article from

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Speaker 1: you and quoting no l At Jason, who's a market watcher,

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Speaker 1: she points out that maybe that's a bad thing that

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Speaker 1: people aren't rotating to bitcoin. Maybe they're just leaving the

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Speaker 1: market altogether. Maybe some of those retail players individual investors

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Speaker 1: who have come in over the last few years, instead

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Speaker 1: of rotating to bitcoin during this period of tumult, they're

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Speaker 1: just rotating out altogether. So the fact that you aren't

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Speaker 1: seeing Bitcoin sort of gain a larger share here maybe

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Speaker 1: not the best sign. One place that maybe is seeing

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Speaker 1: a boost though, are defied exchanges. What can you tell

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Speaker 1: us about that? I think this is going to be

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Speaker 1: such an interesting trend to watch as maybe some of

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Speaker 1: the shell's shock nous of this moment in time fades

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Speaker 1: where people actually begin investing again or where they gravitate

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Speaker 1: to when they're investing in trading cryptocurrencies. Because obviously f

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Speaker 1: t X had been very popular, Binance is still really popular.

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Speaker 1: Coin Base has just seen its stock price absolutely plummet

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Speaker 1: during all of this. I think it's down over eighty

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Speaker 1: percent year to date in the secondary market, and in

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Speaker 1: my conversations that I've had with people just casually, sometimes

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Speaker 1: the question comes up, why is coin based doing so poorly?

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Speaker 1: Isn't it great that one of their biggest competitors has

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Speaker 1: just been wiped out? And the answer that I get

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Speaker 1: is a sort of what Noel Atchinson was talking about.

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Speaker 1: Maybe people are leaving altogether. B There has been this

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Speaker 1: movement back into sort of decentralized exchanges. People have this

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Speaker 1: real desire to own their keys at this moment. They

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Speaker 1: want to be in cold wallets. They don't necessarily trust

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Speaker 1: these centralized exchanges. So whether that continues going forward, or

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Speaker 1: whether the Binances of the world taking even greater share

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Speaker 1: of trading remains to be seen. You've read my mind

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Speaker 1: as usual, because I was going to ask you about Binance,

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Speaker 1: because they did come out and say that they're seeing

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Speaker 1: a boost trading activity. So they're another player that's obviously

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Speaker 1: benefiting a bit from the fallout from one of their competitors, exactly,

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Speaker 1: and coin bases trying to capture that same momentum. But

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Speaker 1: it doesn't seem to have sort of the built in

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Speaker 1: cold following of sort of the crypto native set that

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Speaker 1: finance does. When I think of coin basis, yeah, when

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Speaker 1: I think of coin basis users, I think more of

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Speaker 1: you know, individual investors, retail investors specifically in the United

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Speaker 1: States who maybe lost a lot of money in the

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Speaker 1: past year and are afraid of coming back in Exactly, Well,

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Speaker 1: don it though, I'm curious. I mean, you spend all

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Speaker 1: day talking to crypto people. I sit right behind you,

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Speaker 1: so I hear you you're the best death mate, or

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Speaker 1: I just you dropped a lot. But I mean, in

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Speaker 1: your conversations, have you noticed a shift in how people

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Speaker 1: are managing risk? I do think people are just being

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Speaker 1: much more cautious and much more prudence. So even in

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Speaker 1: the Alameda gap story, we quote a couple of market

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Speaker 1: makers who said they're just being much more cognizant who

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Speaker 1: they're actually trading with who their counterparties are, who's on

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Speaker 1: the other end of of trades. And I think just

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Speaker 1: with the market the state that it's in right now,

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Speaker 1: everybody is still waiting for things to play out. As

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Speaker 1: you said, we're on bankruptcy watch for a number of companies.

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Speaker 1: Nobody knows what's gonna be happening with prices. I mean,

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Speaker 1: there's just so much uncertainty, much more than really usually,

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Speaker 1: and there's a lot of uncertainty in crypto, but just

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Speaker 1: the recent period has been much much sort of like

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Speaker 1: a heightened sense of uncertainty. So I think people are

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Speaker 1: definitely being much more cautious, much more prudent. Well, this

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Speaker 1: was the best conversation I've had all week. This was sublime.

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Speaker 1: I love having the meta conversations about this different ways

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Speaker 1: to be thinking about things. But thank you so much

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Speaker 1: for joining us, Thanks for having me. I can't wait

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Speaker 1: for you to come back soon. That was Bloomberg reporter

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Speaker 1: Katie Greifeld. You can find more of her reporting on

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Speaker 1: the Bloomberg terminal and on Bloomberg dot com. For more,

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Speaker 1: be sure to check out our twice weekly newsletter, Bloomberg Crypto.

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Speaker 1: This is Bloomberg Crypto, a daily podcast from Bloomberg and

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Speaker 1: for the show to Crypto at Bloomberg dot net. The

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Speaker 1: supervising producer of Bloomberg Crypto is Vicky Vergalina. Our senior

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Speaker 1: producer is Janet Babin. Our producers are Mohammed Faruk and

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Speaker 1: Sharon Burriro. Our associate producers are Ty Butler and Moses

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Speaker 1: on Them. Desta wonder At is our engineer. Original music

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Speaker 1: by Leo Sidron. I'm Stacy Marie Schmall. We'll be back tomorrow.

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Speaker 1: A pist