WEBVTT - Crypto's Very Bad, No Good Year 0:00:02.680 --> 0:00:06.000 This is Bloomberg Crypto, a daily Bloomberg IHOD podcast, and 0:00:06.040 --> 0:00:09.480 I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News. 0:00:10.000 --> 0:00:24.960 It's Wednesday, December four. Hey, everybody, quick housekeeping notes. This 0:00:25.000 --> 0:00:28.520 episode was recorded before Sam bankman Fried was arrested in 0:00:28.520 --> 0:00:32.400 the Bahamas earlier this week. SPF, as he's known, has 0:00:32.440 --> 0:00:36.440 now been charged by pretty much everyone, including the Securities 0:00:36.440 --> 0:00:41.000 and Exchange Commission and the Department of Justice, on allegations 0:00:41.080 --> 0:00:45.479 of everything from defrauding investors to com England customer funds. 0:00:45.720 --> 0:00:49.080 While the following episode unpacks the year's biggest stories, I 0:00:49.120 --> 0:00:51.200 would be remiss not to admit that this is perhaps 0:00:51.200 --> 0:00:54.240 the biggest of them all. We'll be covering spfs arrest 0:00:54.280 --> 0:00:56.600 and these charges against him in much more detail in 0:00:56.680 --> 0:01:02.640 other episodes this week. Thanks for tuning in. It's safe 0:01:02.680 --> 0:01:06.920 to say two wasn't the best year the crypto. By 0:01:07.000 --> 0:01:10.480 late January, bitcoin had already shed half its value compares 0:01:10.520 --> 0:01:13.200 to the old times high set previously in November, and 0:01:13.240 --> 0:01:17.120 that number, if you remember, was nearly sixty dollars. Bitcoin 0:01:17.160 --> 0:01:21.200 prices then stayed on a downward trend. That trend accelerated 0:01:21.319 --> 0:01:25.000 after the first major crisis of the collapse of an 0:01:25.000 --> 0:01:29.280 algorithmic stable coin called terra USD. Now, the implosion of 0:01:29.280 --> 0:01:32.480 what was once considered an ambitious experiment for defy sent 0:01:32.640 --> 0:01:35.720 shock waves through the industry, triggering the collapse of a 0:01:35.720 --> 0:01:38.760 crypto hedphone called Three Arrows Capital, which then led to 0:01:38.800 --> 0:01:42.800 bankruptcies that companies called Voyage of Digital and Celsius, and frankly, 0:01:42.800 --> 0:01:44.200 it was starting to feel a little bit like the 0:01:44.240 --> 0:01:48.040 Hunger Games. Crypto CEOs and other senior executives racing for 0:01:48.040 --> 0:01:51.120 the exit, true believers getting into Twitter fights about whether 0:01:51.200 --> 0:01:55.440 centralization was the real enemy, all against this weird backdrop 0:01:55.440 --> 0:01:58.320 of conferences and parties where people were trying to rekindle 0:01:58.400 --> 0:02:01.560 enthusiasm for their board actions. It was a weird time. 0:02:02.040 --> 0:02:04.600 And then, most recently, and for a lot of us, 0:02:04.640 --> 0:02:07.400 most surprisingly, you had the collapse of one of the 0:02:07.480 --> 0:02:11.400 most significant crypto exchanges in the sector FTX. Quite the 0:02:11.480 --> 0:02:14.320 air has not even done here to break down the 0:02:14.400 --> 0:02:17.040 year's biggest stories with me are Bloomberg Reports, has Voldona Hark. 0:02:17.160 --> 0:02:21.560 Crypto people like the idea of becoming more mainstream or 0:02:21.840 --> 0:02:24.400 just being able to be part of your everyday conversation 0:02:24.520 --> 0:02:28.279 and Emilina Cole high yields that Crypto had been advertising 0:02:28.360 --> 0:02:30.760 during this period of low interest rates in the real 0:02:30.919 --> 0:02:34.160 real world to entire small people into the system. Those 0:02:34.240 --> 0:02:37.720 frequently and in a big ways, started to show cracks. 0:02:46.800 --> 0:02:49.480 Emily Voldona, what a pleasure to have you on the show. 0:02:50.160 --> 0:02:52.560 Thank you so much for having us. Emily. Can you 0:02:52.560 --> 0:02:56.080 just remind everybody what your actual job is, because I 0:02:56.120 --> 0:02:59.679 feel like it's it's a little complicated. Yeah, so I'm 0:02:59.720 --> 0:03:04.400 technically the Bloomberg Crypto blogger, which is a real nice phrase, 0:03:04.880 --> 0:03:07.960 but it basically means that, in addition to doing news 0:03:08.000 --> 0:03:11.080 coverage on Crypto, a lot of what I do is 0:03:11.200 --> 0:03:16.240 analysis in terms of exactly helping we just understand what 0:03:16.400 --> 0:03:19.880 happened in this year, in particular what went wrong um 0:03:19.880 --> 0:03:22.359 and who the players were and how that might all 0:03:22.400 --> 0:03:26.600 be interlinked across the whole year. Basically reminding you about, 0:03:26.639 --> 0:03:28.600 like here's the big news today and here's what you've 0:03:28.600 --> 0:03:31.320 forgotten already happened. That should give you all the context. 0:03:31.880 --> 0:03:35.240 Good Please remind me. But Vildonna, welcome back. What do 0:03:35.280 --> 0:03:38.360 you do? I love to be on this podcast specifically, 0:03:38.480 --> 0:03:41.920 that's my main job now. I'm actually a cross asset reporter, 0:03:42.000 --> 0:03:44.120 which when I tell people that, they always say, what 0:03:44.160 --> 0:03:47.560 are cross assets? And I don't have a very good 0:03:47.600 --> 0:03:50.360 answer except that we cover all kinds of markets, including 0:03:50.760 --> 0:03:54.280 for me, the crypto market, which has been actually very 0:03:54.320 --> 0:03:57.000 fun and very rewarding over the last four or five 0:03:57.080 --> 0:04:00.240 years or so, because the stuff that happened in stin 0:04:00.280 --> 0:04:04.160 crypto is sometimes so much wilder than anything you can 0:04:04.160 --> 0:04:07.120 find in the stock market or the bond market, and 0:04:08.160 --> 0:04:10.640 it's sometimes very painful to go through, obviously for a 0:04:10.640 --> 0:04:14.040 lot of people, but it's been very very rewarding to 0:04:14.160 --> 0:04:17.479 be covering and writing stories about. And you say this 0:04:17.520 --> 0:04:20.720 as a person who's covered some wild rides in stocks 0:04:20.720 --> 0:04:22.840 and bonds. Right, So, and one of the things that 0:04:22.839 --> 0:04:24.280 we're going to do in this episode is talking a 0:04:24.360 --> 0:04:26.760 little bit about what was happening in crypto and how 0:04:26.800 --> 0:04:30.440 that was informed by that broader macro context. But first, 0:04:30.480 --> 0:04:32.800 let's do some like do Do Do Do Do? Go 0:04:32.839 --> 0:04:36.880 Back in Time music. That's a really good soundtrack. Our 0:04:36.880 --> 0:04:38.599 sound engine is gonna be mad at me, but let's 0:04:38.600 --> 0:04:46.280 go back in time. Because I feel like to start 0:04:47.760 --> 0:04:49.000 and to talk about what happened, we have to go 0:04:49.040 --> 0:04:53.919 back and specifically, we need to go back to the 0:04:54.000 --> 0:04:57.119 coin base i p Yes, what was going on around 0:04:57.160 --> 0:04:59.520 the time of the coin based i pod we thought 0:04:59.680 --> 0:05:03.680 twin twenty two years. Wild one also was very wild 0:05:04.440 --> 0:05:07.960 because we had just from the pandemic a huge stock 0:05:08.000 --> 0:05:12.800 market rally. We had prices of all manner of crypto things, 0:05:12.839 --> 0:05:15.720 including n f T s and stuff that we had 0:05:15.800 --> 0:05:20.800 never heard of before, skyrocketing in value. Everybody had laser 0:05:20.839 --> 0:05:24.680 eyes on their Twitter profiles, which they've since removed. And 0:05:24.800 --> 0:05:27.200 with the around the coin based i p O, I mean, 0:05:27.200 --> 0:05:31.400 there was just a lot of excitement around it's coming 0:05:31.440 --> 0:05:34.320 out to the public, so to say, it was just 0:05:34.400 --> 0:05:36.760 very exciting for a lot of crypto people because crypto 0:05:36.760 --> 0:05:41.160 people like the idea of becoming more mainstream or just 0:05:41.200 --> 0:05:43.880 being able to be part of your everyday conversation. And 0:05:44.000 --> 0:05:46.800 coin base and obviously a lot of other developments sort 0:05:46.800 --> 0:05:50.400 of helped that. But we we had very low interest 0:05:50.480 --> 0:05:53.159 rates and there was just a lot of speculation, a 0:05:53.200 --> 0:05:55.760 lot of froth, game stop and all of those sort 0:05:55.760 --> 0:05:59.520 of meme stocks. Everything was skyrocketing, including so much stuff 0:05:59.520 --> 0:06:02.760 in crypto mm hmm. And that was you know, April, 0:06:05.040 --> 0:06:08.200 there was a sense of optimism. Yes to the moon. 0:06:08.400 --> 0:06:11.280 We were like, this is everything is going great, you know. 0:06:11.360 --> 0:06:15.120 Fast forward a couple of months or several months to September, 0:06:15.320 --> 0:06:20.080 El Salvador starts accepting bitcoin as legal tender. More enthusiasm, 0:06:20.320 --> 0:06:22.000 you know, the folks who were looking at bitcoin like, 0:06:22.080 --> 0:06:25.719 here's the first best example of an actual government, you know, 0:06:25.760 --> 0:06:29.800 a country taking this token seriously. Fast forward another couple 0:06:29.839 --> 0:06:33.080 of months, you have, as you mentioned, the hype around 0:06:33.800 --> 0:06:38.719 non fungible tokens culminated in every celebrity going on whatever 0:06:38.839 --> 0:06:41.880 nightly talk shows talking about how amazing their Ugo Labs 0:06:41.920 --> 0:06:45.960 board ape situation is. We get to November, bitcoin hits 0:06:45.960 --> 0:06:48.440 an all time high. Yeah, and there was one more 0:06:48.800 --> 0:06:51.600 important thing that happened around then. In October, we had 0:06:51.600 --> 0:06:54.719 the first bitcoin futures et F and actually there are 0:06:54.760 --> 0:06:57.240 a couple of them, but when the first one debuted 0:06:57.240 --> 0:07:00.599 by pro Shares, it saw so much trade eating that 0:07:00.720 --> 0:07:04.360 it was just like for the record books basically, and 0:07:04.640 --> 0:07:07.159 it amassed more than a billion dollars in assets in 0:07:07.240 --> 0:07:09.600 two days, which was also a record. So that also 0:07:09.760 --> 0:07:12.880 was you know, Bitcoin's price was hitting record highs around 0:07:12.880 --> 0:07:15.320 that time, and then in the weeks following it kept 0:07:15.400 --> 0:07:17.600 sort of hitting those highs until we got the almost 0:07:17.600 --> 0:07:21.560 sixty nine thou per coin number. So we're going into December. 0:07:23.080 --> 0:07:28.360 Everything in crypto is amazing, amazing crypto and the booming 0:07:29.000 --> 0:07:31.600 interesting look at bitcoins as well in the cryptocurrency space. 0:07:31.640 --> 0:07:34.160 Of course, this weekend, Emily, everyone paying attention to the 0:07:34.200 --> 0:07:38.360 Super Bowl. It's super Bowl. One of the things that 0:07:38.440 --> 0:07:42.360 was remarkable is on hindsight is everything, but it was, 0:07:42.560 --> 0:07:45.440 you know, people were spending millions and millions of dollars 0:07:45.520 --> 0:07:49.880 on really splashy crypto advertising and the Super Bowl. Even 0:07:49.920 --> 0:07:53.680 if you don't care about football, American football specifically is 0:07:53.720 --> 0:07:59.960 a vehicle for kind of cultural commentary around ads, marketing, branding, sponsorship, 0:08:00.280 --> 0:08:04.200 and so much of that commentary was around crypto. Emily. 0:08:04.760 --> 0:08:10.520 What happened right after that in March, I think probably 0:08:10.560 --> 0:08:13.160 the biggest thing that happened that month was the hack 0:08:13.240 --> 0:08:15.520 of a bridge connected to tax the Infinity, which was 0:08:15.560 --> 0:08:17.880 responsible for making sure that all the people who played 0:08:17.880 --> 0:08:20.760 Acts the Infinity, the boxing game could cash out their 0:08:20.760 --> 0:08:24.760 earnings because it was at that time very popular among 0:08:25.120 --> 0:08:29.160 people in lower income countries for earning a living, and 0:08:29.400 --> 0:08:30.960 for a long time they couldn't get any of their 0:08:30.960 --> 0:08:34.960 money back. So that was the first I suppose ding 0:08:35.200 --> 0:08:38.040 on sentiment right, but it was because it was the first, 0:08:38.200 --> 0:08:40.840 it wasn't the worst. There was a sense of that 0:08:40.880 --> 0:08:45.040 seems bad. There's always stuff like that happening exactly, you know, 0:08:45.120 --> 0:08:47.280 it's like, well, yeah, it's a crypto hack. It's not ideal, 0:08:47.440 --> 0:08:50.880 but we'll we'll get through it. Then we started to 0:08:50.960 --> 0:08:53.920 have to know what an algorithmic stable coin is, and 0:08:54.160 --> 0:08:58.200 specifically terror u s D and its associated token Lunar 0:08:58.800 --> 0:09:02.680 terror USD and its sister token Luna lost their peg 0:09:02.720 --> 0:09:04.760 to the dollar in the last few weeks. They had 0:09:04.760 --> 0:09:08.400 a spectacular meltdown, sending prices to near zero and their 0:09:08.440 --> 0:09:10.880 market value to a shadow of the combined Emily, why 0:09:10.880 --> 0:09:13.200 did so many folks need to care about that? So, 0:09:14.120 --> 0:09:17.600 Tara USC and Luna had been kind of the darlings 0:09:17.640 --> 0:09:20.400 of the defise sector for quite a few months eating 0:09:20.440 --> 0:09:23.640 up to that point, um there had been quite a 0:09:23.720 --> 0:09:27.400 lot of noise going around about about Tara and Luna. Specifically, 0:09:28.160 --> 0:09:31.800 Galaxy Digitals billion I CEO Michael Neverbrat's got famously got 0:09:31.800 --> 0:09:34.280 a tattoo of a lunar wolf to show how much 0:09:34.320 --> 0:09:39.280 he cared about the cryptocurrency, and so when the two 0:09:39.320 --> 0:09:43.120 collapsed together in the space about a week, wiping about 0:09:43.160 --> 0:09:46.040 forty billion dollars in value, this was a sign that 0:09:46.400 --> 0:09:49.240 actually something in the market infrastructure in the way that 0:09:49.280 --> 0:09:52.000 crypto was being sold to people, as this like solve 0:09:52.080 --> 0:09:56.760 all magical financial instrument, was not okay, and not everything 0:09:56.880 --> 0:09:59.600 was was going to be living up to the promises 0:09:59.640 --> 0:10:02.880 that had been touted by its founders. So Terra as 0:10:02.880 --> 0:10:05.160 an indicator of sentiment was a huge deal, But it 0:10:05.200 --> 0:10:08.120 was also a huge deal in terms of the actual 0:10:08.360 --> 0:10:13.160 market consequences that accrued as this thing started to collapse, 0:10:13.200 --> 0:10:16.400 because it turned out, as we have reported, some of 0:10:16.440 --> 0:10:20.440 the biggest and supposedly smartest players in crypto were very 0:10:20.559 --> 0:10:24.920 very exposed to either the Terry USD stable coin itself, 0:10:25.040 --> 0:10:27.360 to other people who were exposed to the terror USD 0:10:27.440 --> 0:10:29.880 stable coin. Filed on and talk a little bit about 0:10:29.880 --> 0:10:32.920 what it was like watching the collapse happen. After that, well, 0:10:32.960 --> 0:10:35.440 two things. Just one thing to just set the scene 0:10:35.480 --> 0:10:38.640 a little bit more. What we have happening this year, obviously, 0:10:38.880 --> 0:10:42.440 is the FED was raising interest rates, and that's really 0:10:42.600 --> 0:10:45.600 sort of put a damper on sentiment, not just in crypto, 0:10:45.679 --> 0:10:48.520 but also in the stock market. The bond market also 0:10:48.640 --> 0:10:53.040 wasn't doing well at all during and so you had 0:10:53.080 --> 0:10:58.280 just people being very risk averse all year long, and 0:10:58.360 --> 0:11:02.000 that in particular, I would say, hit cryptocurrencies and all 0:11:02.040 --> 0:11:05.640 manner of cryptocurrencies and all manner of crypto offshoots and 0:11:05.960 --> 0:11:08.920 you know whatever else. And f t S also dropped, 0:11:09.000 --> 0:11:13.400 I mean plummeted in in value. But to to your 0:11:13.440 --> 0:11:18.080 point about the interconnectedness and the big players that have 0:11:18.200 --> 0:11:22.760 been involved, these are people who had huge followings on Twitter, 0:11:22.840 --> 0:11:27.199 where a lot of crypto discourse happens, and they tweeted 0:11:27.360 --> 0:11:32.040 quite a bit about all kinds of stuff, sometimes sometimes 0:11:32.080 --> 0:11:34.760 at each other, and sort of started these feuds, which 0:11:34.760 --> 0:11:36.560 I'm sure we will talk a little bit more about 0:11:36.600 --> 0:11:40.040 as regards f t X, But it sort of just 0:11:40.160 --> 0:11:44.440 started showing people just how interconnected all of these different 0:11:44.679 --> 0:11:48.760 companies were. Who was loaning money to whom, vice versa, 0:11:48.800 --> 0:11:52.360 who was buying what, And then once one sort of 0:11:52.400 --> 0:11:56.840 block in the domino fell, how it started impacting all 0:11:56.840 --> 0:12:00.679 sorts of other companies and everything was just very to Wolf, 0:12:00.960 --> 0:12:02.640 I can't believe you didn't go for one block in 0:12:02.679 --> 0:12:08.600 the chain, Oh gosh, this opportunity. Gosh, I'll kick myself 0:12:08.640 --> 0:12:11.880 forever for that. Up next, more from Bloomberg reporters Voldana 0:12:11.920 --> 0:12:15.080 Harrig and Emily Nicole on the year's biggest headlines and 0:12:15.120 --> 0:12:18.440 what all of this news could mean for three We'll 0:12:18.480 --> 0:12:31.240 be right back, so, Emily, you know, to to Vldona's points, 0:12:31.280 --> 0:12:35.240 you have this interconnected web of relationships, many of whom 0:12:35.360 --> 0:12:38.640 are people who actively hate each other. What does that 0:12:38.679 --> 0:12:42.680 have to do with three Hours Capital? They had made 0:12:42.679 --> 0:12:45.560 some rather sizeable bets when it came to Tara and Luna. 0:12:45.679 --> 0:12:49.400 So when the value of those holdings went to zero, um, 0:12:49.440 --> 0:12:52.280 the loans that have been extended to three Hours Capital, 0:12:52.360 --> 0:12:55.160 with which it made most of its trading, they were 0:12:55.200 --> 0:12:57.319 no longer able to meet those loans, and so when 0:12:57.320 --> 0:13:00.600 the margin calls came in, everything just basically collapsed and 0:13:00.600 --> 0:13:03.560 and that went down too. But being a hedge fund 0:13:03.559 --> 0:13:06.800 of thoughts at three hours Capital had clients. Many firms 0:13:06.880 --> 0:13:10.000 had either lended loan money to three hours or had 0:13:10.640 --> 0:13:14.080 invested in it. And so therefore, as fil Downa described 0:13:14.080 --> 0:13:17.240 it as dominos, those sides fall too, and we get 0:13:17.280 --> 0:13:20.400 to now see the beginnings of this ripple effect that 0:13:20.559 --> 0:13:24.200 spreads out from almost like terrors the start of it, 0:13:24.240 --> 0:13:27.160 although obviously the market had already started to show signs 0:13:27.160 --> 0:13:29.760 of weakness before then. But as we go further and 0:13:29.760 --> 0:13:33.360 further out, even as far as like this month alone, 0:13:33.640 --> 0:13:36.920 we still have people saying, oh, and the knock on 0:13:36.960 --> 0:13:39.080 the market that happened with Terror is the reason why 0:13:39.120 --> 0:13:42.800 we have losses today. Um, and that slowly started the 0:13:42.840 --> 0:13:45.680 web of bankruptcies that we're currently in. And when you 0:13:45.720 --> 0:13:49.120 talk about things like margin calls, counterparties, what you're describing 0:13:49.200 --> 0:13:52.439 is the fact that so many of these players all 0:13:52.600 --> 0:13:57.040 each other money. So you know, you could be hedge 0:13:57.040 --> 0:14:00.520 fund and you borrow money from this lender over here 0:14:00.559 --> 0:14:03.640 in order to do a trade on this other thing 0:14:03.679 --> 0:14:05.400 over here, and in order to do a trade on 0:14:05.440 --> 0:14:07.760 that thing, you had to put up some collateral. So 0:14:07.960 --> 0:14:12.120 Three Arrows Falls files for bankruptcy in their week. A 0:14:12.160 --> 0:14:15.640 couple of other companies, one called Voyager, one called Celsius 0:14:15.840 --> 0:14:20.400 also file for bankruptcy, Celsius being perhaps the most consumer 0:14:20.520 --> 0:14:24.720 facing of the entities that have been caught up in 0:14:24.760 --> 0:14:28.000 this so far, because well, what was the Celsius business model? 0:14:28.320 --> 0:14:32.000 What did they do? So Celsius was in the business 0:14:32.080 --> 0:14:35.240 of giving people yields if you promised to lock up 0:14:35.280 --> 0:14:37.160 your tokens with them. So if you think about it 0:14:37.200 --> 0:14:38.880 a little bit like a savings account, but you know, 0:14:38.960 --> 0:14:41.800 just without any of the banking licenses or regulators or 0:14:41.840 --> 0:14:43.880 any of the bits to protect you if the company 0:14:43.920 --> 0:14:47.280 goes under UM. And what it turned out is that 0:14:47.320 --> 0:14:49.440 if people had read the terms of service, they would 0:14:49.440 --> 0:14:51.520 have seen that. And actually this is pretty common and 0:14:51.600 --> 0:14:53.720 a lot of crypto company's terms of service as we 0:14:53.800 --> 0:14:57.200 now know UM. If you gave your assets to Celsius, 0:14:57.240 --> 0:14:59.360 Celsius reserve the right to do or whatever it wanted 0:14:59.360 --> 0:15:01.640 with those assets. They no longer really belonged to you 0:15:01.720 --> 0:15:04.600 in any sense of the word. So when what they 0:15:04.640 --> 0:15:06.560 had done in order to generate those yields that it 0:15:06.600 --> 0:15:12.240 could pay back out was invest those tokens elsewhere rehypothication UM. 0:15:12.280 --> 0:15:14.360 And as a result, if some of that went in lunar, 0:15:14.680 --> 0:15:16.840 that all went. If some of it went in something 0:15:16.960 --> 0:15:20.160 that was called staked ether um, that also started to 0:15:20.200 --> 0:15:22.600 show slight signs of discount from the price of main 0:15:22.640 --> 0:15:24.680 Either I won't get into the actual mechanics of it, 0:15:24.680 --> 0:15:28.320 but basically that was unstable too UM. And so Eventually, 0:15:28.520 --> 0:15:32.320 the high yields that crypto had been advertising during this 0:15:32.480 --> 0:15:35.080 period of low interest rates in the real real world 0:15:35.080 --> 0:15:38.760 to entire small people into the system, those frequently and 0:15:39.320 --> 0:15:42.200 in big ways started to show cracks and signs of 0:15:42.280 --> 0:15:45.200 that they weren't able to sustain offering those yields anymore. 0:15:45.240 --> 0:15:48.560 And now if you see platforms offering yields of I mean, 0:15:48.640 --> 0:15:50.720 eight percent is probably about the average now, but back 0:15:50.760 --> 0:15:54.480 then it was um that's also a massive warning sign 0:15:54.520 --> 0:15:56.600 to consumers that this is probably not something that can 0:15:56.600 --> 0:15:59.800 guarantee that yield for very long. And was on this 0:16:00.000 --> 0:16:02.360 how does this fit into the rising interest rate environment 0:16:02.360 --> 0:16:06.120 that you described? Well, I think from because I talked 0:16:06.120 --> 0:16:08.880 to a lot of rad five people, traditional finance people too, 0:16:08.960 --> 0:16:12.480 and all along what they sort of as onlookers into 0:16:12.480 --> 0:16:15.960 the crypto world had been saying is these are warning signs. 0:16:16.000 --> 0:16:20.120 You can't just earn eight, ten, twenty percent just lending 0:16:20.200 --> 0:16:22.720 out your crypto holdings, that we're putting your money in 0:16:22.800 --> 0:16:25.760 some of these bank like products without there being just 0:16:25.960 --> 0:16:29.720 so much risk involved. And this sort of kept playing 0:16:29.760 --> 0:16:32.400 out throughout the year. So we we saw it with 0:16:32.880 --> 0:16:36.640 Celsius and Voyager. Obviously, both of them going under, but 0:16:36.680 --> 0:16:40.680 then also later on with Gemini, and that also was 0:16:40.920 --> 0:16:43.520 a yield earning product where people had put in bitcoin 0:16:43.640 --> 0:16:46.200 or ether or some sort of stable coin and then 0:16:46.960 --> 0:16:49.440 the gem it was called Gemini earned, Gemini earned, would 0:16:49.520 --> 0:16:54.160 lend out those holdings and try to earn an interest 0:16:54.320 --> 0:16:58.200 in return for themselves. And those also have the withdrawals 0:16:58.240 --> 0:17:01.000 have been halted and book can't get their money back. 0:17:01.240 --> 0:17:04.200 So another example of the ways in which the main 0:17:04.320 --> 0:17:06.520 streaming of crypto that you referred to at the beginning 0:17:07.000 --> 0:17:09.639 turned out to have pretty serious consequences for people in 0:17:09.640 --> 0:17:13.320 ways that they weren't necessarily expecting or hoping for. Now, 0:17:13.400 --> 0:17:18.320 in around October two, you know, a couple of months 0:17:18.320 --> 0:17:22.920 after these various thirty years ago, after these bankruptcies start 0:17:23.080 --> 0:17:27.959 getting filed, we published a story about the wave of 0:17:28.600 --> 0:17:32.640 high ranking you know, executive suite departures. Vasan, I don't 0:17:32.640 --> 0:17:34.280 even know if you even remember, but you were like 0:17:34.320 --> 0:17:39.640 one of the people who wrote the story because like 0:17:39.960 --> 0:17:43.639 dozens of whether they are crypto CEUs or people in 0:17:43.840 --> 0:17:48.560 risk or heads of trading were either being downsized, right, 0:17:48.600 --> 0:17:50.520 so there were layoffs and they were part of them, 0:17:50.640 --> 0:17:52.080 or they were like I'm gonna go spend some more 0:17:52.080 --> 0:17:55.000 time with my yacht. YEP, that is a real thing 0:17:55.000 --> 0:17:57.560 that I would love to not making that up. So, 0:17:57.760 --> 0:18:02.159 you know, you start to see this um sinking ship 0:18:02.520 --> 0:18:05.080 feeling sentiments and that that in and of itself. People 0:18:05.119 --> 0:18:06.800 are looking around and they're like, hang on a minute, 0:18:07.160 --> 0:18:08.840 why are all these people losing their jobs? Why are 0:18:08.840 --> 0:18:11.880 all these people quitting? There were very, very significantly off 0:18:12.040 --> 0:18:15.560 at a lot of places. And then less than a 0:18:15.680 --> 0:18:19.840 month later is when we perhaps get into the part 0:18:19.920 --> 0:18:25.040 of the crisis that I'm not sure most people would 0:18:25.080 --> 0:18:28.119 have said, this is the next shoe to drop, and 0:18:28.160 --> 0:18:32.600 that shoe was the collapse of f t X and 0:18:32.720 --> 0:18:37.640 it's CEO and it's CEO Sam Bankman freed emily. If 0:18:37.640 --> 0:18:40.960 it were possible to summarize the state of things about 0:18:41.320 --> 0:18:47.040 how we got there, what would you say? So hind signe. 0:18:47.080 --> 0:18:49.240 So now my explanation will be covered by the facts 0:18:49.240 --> 0:18:51.040 that we know now compared to what we knew before. 0:18:51.960 --> 0:18:55.000 F t X had its own native token called ftt 0:18:55.840 --> 0:18:59.360 and it appears that f t X belong with its 0:18:59.359 --> 0:19:04.560 sister trade platform, Alameda Research had been using that token 0:19:04.720 --> 0:19:07.239 for various purposes, but mainly one of those was at 0:19:07.280 --> 0:19:10.840 least at Alameda as collateral for loans that it had 0:19:11.359 --> 0:19:14.560 taken out to fund its trading activities. There are also 0:19:14.640 --> 0:19:17.600 some suggestions now and these are being investigated to the 0:19:17.720 --> 0:19:20.399 present as to whether or not f t X commingled 0:19:20.480 --> 0:19:22.960 customer assets with Alameda assets not to be able to 0:19:23.000 --> 0:19:26.239 fund some of these trades as well. Um But in 0:19:26.400 --> 0:19:30.359 October some of this information was leaked into the press, 0:19:30.400 --> 0:19:35.480 and Finances CEO shangqung Zhao said that he would sell 0:19:35.680 --> 0:19:39.400 a very large portion of FTT because Finance was concerned 0:19:39.440 --> 0:19:43.800 about how how stable that business was. And from there 0:19:43.840 --> 0:19:47.840 it took oh, i'd say less than two days until 0:19:48.320 --> 0:19:51.560 ft X then said okay, we are selling ourselves to Finance, 0:19:51.960 --> 0:19:54.800 and then less than twenty four hours again until Finance 0:19:54.840 --> 0:19:57.640 said sorry, no, we don't want that deal, and then 0:19:57.680 --> 0:20:02.520 another another twenty rouse until Alamidas Sam bankmin Freed said 0:20:02.520 --> 0:20:05.119 Alameda would wind itself down, and then another twenty four 0:20:05.119 --> 0:20:08.400 hours until FTX was in bankruptcy. So between Sunday and Friday, 0:20:08.920 --> 0:20:12.080 one of the largest crypto exchanges that we have was gone. 0:20:12.400 --> 0:20:16.000 In other words, thirty years went by. That was during 0:20:16.040 --> 0:20:17.720 that week. That was quite a week. That was quite 0:20:17.720 --> 0:20:20.400 a week. And you know, the thing, just the gloss 0:20:20.400 --> 0:20:21.640 I want to put on top of all of this 0:20:21.720 --> 0:20:24.159 is like, while all of this was happening, everything that 0:20:24.160 --> 0:20:28.919 we've just described, bank when Freed had been playing the 0:20:29.080 --> 0:20:34.600 part of rescuer in chief, right, So when the collapse 0:20:34.840 --> 0:20:39.640 of three Hourrows triggered the collapse of Celsius and Voyager 0:20:39.720 --> 0:20:42.239 and other companies, bankman Freed emerge and he's like, I 0:20:42.280 --> 0:20:44.880 will buy everyone, or at least you know, he will 0:20:44.920 --> 0:20:47.280 buy the ones that he could Abriese financing for and 0:20:47.280 --> 0:20:50.000 be he thought was worth his and f t X 0:20:50.040 --> 0:20:52.840 as time. This was also a period in which there 0:20:52.880 --> 0:20:56.080 were intensive discussions around the world about how best to 0:20:56.119 --> 0:20:59.640 regulate crypto, and various crypto ceo saying all we want 0:20:59.680 --> 0:21:02.480 is notory clarity. Please give that to us. Here. We've 0:21:02.480 --> 0:21:06.840 written you proposals, so you know of which exactly of 0:21:06.880 --> 0:21:08.480 which Sam was the face. You know, obviously you also 0:21:08.520 --> 0:21:11.320 had Brian Armstrong coin Base CEO being you know, represented 0:21:11.359 --> 0:21:14.760 in these conversations, and in the US, you have um 0:21:15.119 --> 0:21:18.240 CC of Finance being represented not in the US, but 0:21:18.359 --> 0:21:21.040 certainly in conversations and many other countries around the world. 0:21:21.720 --> 0:21:26.920 And now it's almost as if none of that happened. 0:21:27.040 --> 0:21:29.600 I think that the sort of the strangest thing about 0:21:29.640 --> 0:21:33.040 twenty two. It's not even that we're back where we're started. 0:21:33.080 --> 0:21:36.879 It's like we're back into before the coin base. I P. Well, one, 0:21:36.880 --> 0:21:39.000 there's a lack of liquidity, Like the amount of trading 0:21:39.000 --> 0:21:41.160 that's happening in crypto has essentially fallen off a cliff, 0:21:41.200 --> 0:21:43.840 partly because some of the places people were trading on 0:21:44.080 --> 0:21:48.520 went bust. There is a real noticeable, shall we say, 0:21:48.640 --> 0:21:52.399 vibe shift in the sentiment for an industry that not 0:21:52.600 --> 0:21:57.439 super long ago was having debauched parties in Miami and 0:21:57.480 --> 0:21:59.879 now they're worrying about being summoned in front of you 0:22:00.160 --> 0:22:05.439 senators and other types of investigators. And we have a 0:22:05.520 --> 0:22:09.000 definite change and tenor of the regulatory conversation because it's 0:22:09.040 --> 0:22:12.359 gone from how can we help this industry to succeed 0:22:12.600 --> 0:22:17.000 to how can we protect consumers? Emily, I want to 0:22:17.000 --> 0:22:18.840 make sure that you know, we don't only talk about 0:22:18.880 --> 0:22:20.520 what's been happening in the US. Tell us a little 0:22:20.520 --> 0:22:22.040 bit about how some of these things played out in 0:22:22.080 --> 0:22:24.720 the UK and Europe. Let's start with Europe because that's 0:22:24.760 --> 0:22:28.480 the that's a little bit easier. The European Union has 0:22:28.520 --> 0:22:32.240 been working on a comprehensive crypto regime for a long time, 0:22:32.320 --> 0:22:35.200 and that was partly the the criticism of the EU 0:22:35.240 --> 0:22:36.919 earlier this year was that it had taken them so 0:22:36.960 --> 0:22:39.880 long to get here UM. But in June they agreed 0:22:40.280 --> 0:22:44.520 the provisional steps for MIKA as it's known UM that 0:22:44.560 --> 0:22:47.680 would put in place some level of oversight of crypto 0:22:47.720 --> 0:22:51.119 companies and maybe a little bit of protection for for 0:22:51.160 --> 0:22:54.040 consumers in terms of just helping make sure that companies 0:22:54.840 --> 0:22:56.919 do as they say they do and are overseen properly 0:22:56.960 --> 0:23:00.639 by local regulators. UM. There are things that are not 0:23:00.680 --> 0:23:02.320 included in there, which were some of the things that 0:23:02.359 --> 0:23:05.360 went wrong this year, like defy and staking and particular 0:23:05.359 --> 0:23:07.119 types of crypto assets, and so that will all have 0:23:07.160 --> 0:23:10.720 to come later, but the basics right UM, and that 0:23:10.880 --> 0:23:14.880 is due to be going through final agreement in February 0:23:15.200 --> 0:23:20.000