Speaker 1: This is Bloomberg Crypto Daily Bloomberg I heard podcast and
Speaker 1: I'm Philip Lawyer Kransler, senior crypto editor for Bloomberg News.
Speaker 1: In Today for Stacy Marie Ishmael, It's Friday, December two. Well,
Speaker 1: the apples are falling from the crypto tree one by one.
Speaker 1: Contagion is still the name of the game, and this
Speaker 1: week it was Block five filing for bankruptcy protection. Also,
Speaker 1: crypto hedge funds are losing faith in centralized exchanges. Here
Speaker 1: to help me break down the news is Bloomberg Senior
Speaker 1: crypto editor Anna Arera. The question is if something happens
Speaker 1: to Binance, and I'm not saying that we have indications
Speaker 1: that it will, but who rescues Binance then? And you know,
Speaker 1: you perhaps need money from outside the industry as well,
Speaker 1: not just inside. And crypto reporter tens ill act are
Speaker 1: the current regulation of crypto is partly shaped by misconceptions,
Speaker 1: the belief that space must be given to innovation all costs.
Speaker 1: Crypto contagion is showing very few signs of slowing down. Monday,
Speaker 1: it was Block vice turn to file for bankruptcy, filing
Speaker 1: for Chapter eleven bankruptcy protection in New Jersey, and are
Speaker 1: you help cover that story a little bit? Um, can
Speaker 1: you tell us a little bit about what happened and
Speaker 1: how significant this is? Yeah, I mean it's it's a
Speaker 1: big deal. It was not totally unexpected because they were
Speaker 1: having trouble earlier in the crypto winter being a lender.
Speaker 1: Obviously they suffered from the um falling prices and they
Speaker 1: were rescued by FTX, and so obviously now we know
Speaker 1: FDx itself needed rescuing, so clearly, um they had to
Speaker 1: sort of file for bankruptcy too because the rescuer went down. Um,
Speaker 1: it wasn't necessarily a massive shock to the sector. We
Speaker 1: don't know the extent of contagion because, as with fd X,
Speaker 1: the names of the creditors have been redacted, so we
Speaker 1: don't know yet. But people were sort of expecting it
Speaker 1: more than perhaps obviously for sure, more than they were
Speaker 1: expecting the FTX collapse. Um. It does obviously leave the
Speaker 1: door open to more contagient because who knows who their
Speaker 1: counterparties are, and if perhaps they're also counterparties to ft X.
Speaker 1: So I think people are sort of expecting perhaps more
Speaker 1: shoes to drop. Um. But we'll have to follow what's
Speaker 1: going on there. Yeah, and to your point about UM,
Speaker 1: you know, having names redacted for major creditor that creditors
Speaker 1: that are also appliance. I think we had at least
Speaker 1: six or seven names with north of ten million dollars
Speaker 1: or claims on them, So it's fair to even without
Speaker 1: knowing who the names are, it's fair to assume presumably
Speaker 1: that several outfits are sitting on rather large losses out
Speaker 1: there stemming from this potentially. Yes, yeah, I mean we
Speaker 1: saw the list of creditors without names had like big
Speaker 1: big sums next to it, so it will be someone
Speaker 1: maybe not necessarily a known crypto only firm UM that
Speaker 1: has a huge loss because of Block five. Actually, curiously,
Speaker 1: one of the entities that was mentioned and wasn't redacted
Speaker 1: was the sec UM and Block fights at thirty million dollars,
Speaker 1: which is part of a settlement UM that they were
Speaker 1: paying UM because of an issue they had earlier in
Speaker 1: the year, which is somewhat funny, but they're not really
Speaker 1: that funny UM. But yeah, it's curious. I guess it's
Speaker 1: like part of the crypto world that someone going bankrupt
Speaker 1: owns owes the regulator millions of dollars basically, sec get
Speaker 1: in line. You alluded to the fact this wasn't entirely
Speaker 1: a bombshell surprise, and we've actually seen crypto markets fairly
Speaker 1: stable throughout the week. We got bitcoin trading I believe,
Speaker 1: just below seventeen thousand right now. Um, but there are
Speaker 1: a wild range of forecasts and predictions out there right now.
Speaker 1: Pass What can you tell me about that? What? What?
Speaker 1: What have we seen in the last week? Um? Yeah, sure,
Speaker 1: So you know, it's pretty surprising that it's the bitcoins
Speaker 1: reached seventeen thousands, it's the highest level in two weeks,
Speaker 1: and other also has climbed up four as well. Um,
Speaker 1: the predictions out in the market right now. So we're
Speaker 1: hearing Mark Mobius, who's the co founder of morbius Um
Speaker 1: cups of Partners. He sees the next target for bitcoin
Speaker 1: being ten thousand dollars um. So, although he did say
Speaker 1: he won't be investing his own cash of client money
Speaker 1: and digital assets as it's too dangerous, and he also
Speaker 1: went on to say crypto is he to stay as
Speaker 1: there are several investors who still have faith in it.
Speaker 1: So messages from Mobius um. There was also a Wall
Speaker 1: Street Journal column up by Andique Kessler, who says crypto's
Speaker 1: final price could be zero, which states that no st
Speaker 1: lender would extend credit against assets lacking any underlying collateral.
Speaker 1: He also went on to compare the technology and debt
Speaker 1: to red bull and milk, saying that they don't mix,
Speaker 1: so you're seeing mixed messages. And then ECB also detailed
Speaker 1: it stands on bitcoin um market in general through a
Speaker 1: blog post, saying, Um, the current regulation of crypto is
Speaker 1: partly shaped by misconceptions, the belief that space must be
Speaker 1: given to innovation at our costs. So, I mean, the
Speaker 1: post in general was quite negative about crypto. So, I mean,
Speaker 1: there's not a lot of faith in the market right now.
Speaker 1: But who knows? What are the bulls countering with? Anna?
Speaker 1: One thing that we see quite a lot is, you know,
Speaker 1: people are still building the block change operating, the de
Speaker 1: FI protocols are still running. What are we hearing from
Speaker 1: the bulls right now? Um? Sort of the crypto proponents
Speaker 1: and you can separate the Bitcoin maxis from the rest
Speaker 1: or in general, sort of people that believe in digital
Speaker 1: assets say and point to the fact that actually f
Speaker 1: t X isn't bitcoin, it's a centralized entity, and it's
Speaker 1: sort of the opposite of what you would want UM
Speaker 1: crypto for UM, and it just again reinforces the idea
Speaker 1: that you need decentralized money because things like FTX happen
Speaker 1: UM and so that you know there's still value in
Speaker 1: digital assets and in bitcoins specifically, because it's not it's
Speaker 1: not what collapsed and the networks still running and and
Speaker 1: you know it wasn't a crash and it wasn't like
Speaker 1: bitcoin filing for bankruptcy if you will, is fd X.
Speaker 1: Of course, like one argument you could have to that
Speaker 1: and is that you know, normal people can't really disting
Speaker 1: wish between perhaps f t X and UM bitcoin or
Speaker 1: the protocol they might have bought bitcoing through ft X,
Speaker 1: and so maybe not for everyone. The distinction isn't very
Speaker 1: clear because many of these firms that are centralized entities
Speaker 1: became the representatives for for the asset class. If you
Speaker 1: think about it, especially how much money they spent on
Speaker 1: advertising over the past year. You know, I was watching
Speaker 1: the World Cup last night, you still see crypto dot
Speaker 1: Com advertised UM near the players. So it will be
Speaker 1: clear for people in crypto, but it might be too subtle.
Speaker 1: Maybe for for for some you know, tourist investors as
Speaker 1: they like to like to call them. But we'll see. Like, certainly,
Speaker 1: you know, it is quite um surprising that bitcoin has
Speaker 1: held this much. You know, maybe you would have asked someone,
Speaker 1: even a crypto believer, a few weeks ago, what would
Speaker 1: happen to bitcoin? Surprised if ft X collapse in the
Speaker 1: space of a week, and many of them, even bitcoin believers,
Speaker 1: would have thought that it would have fallen beyond what
Speaker 1: we saw it go down to. Yeah, I'm surprised it's
Speaker 1: not lower, it didn't crush further down to like anyway,
Speaker 1: that's just my opinion. There is a little bit of
Speaker 1: unusual resilience here. Maybe um, maybe the hoddlers are finally
Speaker 1: standing their ground. I do want to talk about another
Speaker 1: type of trader that we just covered in a really
Speaker 1: nice story that Anna you worked on the hedge fund
Speaker 1: crowd or should I say the crypto hedge fund crowd
Speaker 1: that are following the ft X debacle kind of losing
Speaker 1: fate in the notion of the centralized crypto exchanged as
Speaker 1: it stands today, and I can you tell us a
Speaker 1: little bit more about that. Yeah, So obviously one of
Speaker 1: the biggest groups that were hurt during FTX we were
Speaker 1: pro traders and hedge funds and market makers. Because FTX
Speaker 1: was built by a trader and by traders. One of
Speaker 1: the original slogan was built by traders for traders, I believe,
Speaker 1: So it was hugely popular with professional investors. It was
Speaker 1: seeing sort of as the gold standard or like it was,
Speaker 1: you know, really great for for professional trading. It had
Speaker 1: got lots of leverage and had all these derivatives. It's
Speaker 1: very attractive. So clearly when it collapsed, it caught many people,
Speaker 1: even like pro um o G you know crypto funds,
Speaker 1: UM caught them by surprise. And so if some of
Speaker 1: them have had big losses, I mean obviously they ranged.
Speaker 1: One fund we heard had to close. There might be
Speaker 1: more we haven't heard of, but many had a little
Speaker 1: bit of money on there for sure, because you needed
Speaker 1: it to trade UM. And another thing of crypto platforms
Speaker 1: is that it's it's not like Wall Street where you
Speaker 1: have a trading platform, then you have a custodian clearinghouse
Speaker 1: and UM a prime broker. A lot of that happens
Speaker 1: on exchange, and so you also need to post your
Speaker 1: collateral and exchange if you want to margin trade there,
Speaker 1: and clearly, if then the exchange goes down, you're not
Speaker 1: only losing your trading capital, you're losing what you're what
Speaker 1: you're moving on exchange, but you're losing your collateral too,
Speaker 1: and that's a big leap of faith now right to
Speaker 1: go on another exchange. So we're hearing or you know
Speaker 1: our report, I was hearing about sort of some some
Speaker 1: funds that are a bit wary now and they don't
Speaker 1: want to post their collateral anymore. So they're trying to
Speaker 1: push for separation of powers, which would then make the
Speaker 1: market look a bit more like Wall Street, which which
Speaker 1: is of course ironic because the whole point was to
Speaker 1: make it not look like Wall Street. And this is
Speaker 1: the theme that's actually been cropping up quite repeatedly in
Speaker 1: the last couple of weeks. They're post FTX. Is this
Speaker 1: idea of the crypto exchange, or that, i should say,
Speaker 1: the centralized crypto exchange. It's kind of a sort of
Speaker 1: a weird animal which does multiple Wall Street functions in
Speaker 1: in in one organization wraps them all together. It's sort
Speaker 1: of as you're saying, it's it's there's a little bit
Speaker 1: of an irony in there that the industry that was
Speaker 1: supposed to be the inverse of Wall Street might actually
Speaker 1: become more like Wall Street as a result of this.
Speaker 1: What are your thoughts around that? Yeah, And I guess
Speaker 1: it's interesting because perhaps it just shows how it is
Speaker 1: just following the evolution and some of the mistakes that
Speaker 1: happened on Wall Street because obviously, like some of the
Speaker 1: separations of powers on Wall Street and market structure there
Speaker 1: were in forced after the financial crisis of two thousand
Speaker 1: and eight where people got hurt and where you know,
Speaker 1: the rules came and made off as well, like clear
Speaker 1: segregation of client assets UM, moving more stuff on you know,
Speaker 1: murky stuff on transparent platforms UM, and making sure that
Speaker 1: everything was separate because that reduces conflicts of interest. So
Speaker 1: in a way, rather than I guess it's repeating, it's
Speaker 1: replicated Wall Street and also the mistakes of Wall Street,
Speaker 1: which is really which is really interesting. We'll be right
Speaker 1: back with more of the week's top crypto stories with
Speaker 1: Anna Arera and Tanzille Actor. It wouldn't be a full
Speaker 1: crypt episode without talking about UM, our favorite crypto exchange
Speaker 1: finance UM. They were in the New Striking a deal
Speaker 1: in Japan, tas what happened there. Um, Yes, so binances
Speaker 1: re entering Japan, which is really interesting. UM. In the
Speaker 1: early days, Japan was a hope for crypto um as
Speaker 1: it was home for mark Gox. So I'm not sure
Speaker 1: if you know. I'm sure people have heard the Mount
Speaker 1: Cox and how there was a massive hack which involved
Speaker 1: four hundred and sixty million at the time going missing.
Speaker 1: So Japan itself has been very like careful when it
Speaker 1: comes to UM regulating crypto. So obviously finance re entering
Speaker 1: Japan I think is a big deal because Japan is
Speaker 1: super careful when it comes to regulations around crypto UM.
Speaker 1: They've also been one of the markets that even that
Speaker 1: has been one of the older adopters I think in
Speaker 1: Asia of krypto, and obviously, as Stars was saying they
Speaker 1: were burned by Mount Cox or early on, they tightened
Speaker 1: regulation a bit more. So it's interesting now and that
Speaker 1: led some players to leave, and I guess now with
Speaker 1: the regulation that's in place, it's it's leading players to
Speaker 1: come back, which is I guess some of the point
Speaker 1: that the point that some crypto firms make, they say, well,
Speaker 1: the lack of regulation makes This makes it unclear, and
Speaker 1: so it's pushing us to go offshore somewhere else. If
Speaker 1: we had clear regulation, at least we know what rules
Speaker 1: to play by UM, which is a point, But then
Speaker 1: I guess the counterpoint is, you know, you could just
Speaker 1: follow the regulation that exists on it, I would say
Speaker 1: other assets. That's quite a bullish move on Japan's front
Speaker 1: when it comes to crypto, like letting Binance one of
Speaker 1: the biggest exchanges to list out there. I don't know,
Speaker 1: that's my point of view. They're not. I don't know
Speaker 1: if the term is listing you think they are. They
Speaker 1: are gaining a foothold in Japan, I think we can say.
Speaker 1: And you know, on the topic of viinance, they are
Speaker 1: obviously the eight hundred pound guerrilla in the industry right now,
Speaker 1: especially after FT excess demise, and they have been kind
Speaker 1: of on the trying to get on the front foot
Speaker 1: a little bit in the last two weeks UM and
Speaker 1: one of their initiatives and has been this industry recovery
Speaker 1: initiative what do you want to call it? A rescue
Speaker 1: fund for promising but cash trapped crypto startups CC. You've
Speaker 1: talked about launching a Crypto Recovery Fund. Where are you
Speaker 1: on that? You've talked about interest being quite substantial. Who's interested? Um,
Speaker 1: there's being back and forth on how to structure that.
Speaker 1: Do we make it at a loose fund or do
Speaker 1: we make it that actual fund fund. I think we're
Speaker 1: kind of going with a loose approach where different industry
Speaker 1: players will just contribute as they wish. So what have
Speaker 1: we seen there and what might their motivations be behind
Speaker 1: these efforts? I guess maybe part of it is also
Speaker 1: for morale to show that there's still money and um,
Speaker 1: you know interest in crypt obviously, like a crypto firm
Speaker 1: would have interesting crypto, but just to show that there's
Speaker 1: still some life here. UM. It was interesting that they
Speaker 1: said they have around a billion, the action fund will
Speaker 1: be around a billion, and they had other firms like
Speaker 1: notably some market makers committing money too, but like the
Speaker 1: Lion's share was from finance um, which you know is curious,
Speaker 1: but as as well, you know, you're sort of seeing
Speaker 1: parallels with the early SPF days, the SPF of summer
Speaker 1: when he was coming in and having to rescue. So
Speaker 1: you know, the question is if something happens to Binance
Speaker 1: and I'm not saying that we have indications that it will,
Speaker 1: but who rescues Binance then? And you know, you perhaps
Speaker 1: need money from outside the industry as well, not just inside.
Speaker 1: But it's definitely an interesting thing to to watch and
Speaker 1: see what they decided to to invest in. I think
Speaker 1: we had Ces on TV last week and he was
Speaker 1: discussing how they're looking at another Voyager bid. They're going
Speaker 1: to look at FTX assets as well, see what's what's
Speaker 1: viable there, and I think they said they were in
Speaker 1: talks with Genesis too. So basically to conclude the session,
Speaker 1: watch c Z and Binance and let us see what
Speaker 1: happens in the next few weeks. Thank you Anna, and
Speaker 1: thank you tan Sale. You can find more of Anna
Speaker 1: Arera and Tansale actors reporting on the Bloomberg Terminal and
Speaker 1: on Bloomberg dot com. For more, be sure to check
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