Speaker 1: This is Bloomberg Crypto and Daily Bloomberg I heard podcast,
Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for
Speaker 1: Bloomberg News. It's Thursday, September one. Black Rock, the world's
Speaker 1: largest asset manager, teamed up with the crypto exchange coin Base,
Speaker 1: in a move that both Wall Street and cryptotypes are
Speaker 1: watching pretty closely. Black Rock says the partnership will help
Speaker 1: clients more easily manage and trade their bitcoin. It's a
Speaker 1: deal that comes at an interesting time for coin Base,
Speaker 1: which posted a record one point one billion dollar loss
Speaker 1: for the second quarter of two The company shares have
Speaker 1: fallen at least fifty this year, but of course they
Speaker 1: rallied right after that partnership was announced because people were
Speaker 1: excited about the prospects for them. Coin bases shares have
Speaker 1: gained almost forty more than over three days, so you're
Speaker 1: really seeing some of the gains come back to coin
Speaker 1: basis stock that's down still more than six this year.
Speaker 1: Coin Based has also been facing a decent amount of
Speaker 1: regulatory scrutiny on multiple fronts. For more on this latest
Speaker 1: Wall Street four into crypto, I'm joined by Bloomberg reporters
Speaker 1: you each yang this black Rock deal is really a
Speaker 1: validation to show that coin Base is still very much
Speaker 1: a giant in the industry and cell brush, So it
Speaker 1: was essentially an effort to kind of bring into the
Speaker 1: black Rocks sort of technology fold bitcoin alongside all these
Speaker 1: other passets. You ashually welcome back to the podcast and
Speaker 1: still a first time guest, looking forward to have you
Speaker 1: on more. So, one of the things that was not
Speaker 1: necessarily expecting over the past couple of months was perhaps
Speaker 1: the rate of I wouldn't quite call it a detent,
Speaker 1: but at least the willingness of extremely traditional Wall Street
Speaker 1: firms large, very large and gigantic to engage with crypto
Speaker 1: in different ways. And one of the most recent examples
Speaker 1: that we've had about this is, you know, something you've
Speaker 1: both covered in different ways, which is, you know, black
Speaker 1: Rock teaming up with coin Base to offer kind of
Speaker 1: a range of different sorts of services to institutional investors.
Speaker 1: And so before we go too much into what that
Speaker 1: partnership says, can you just explain to people what black
Speaker 1: Rock does, why, and why they're such a big deal.
Speaker 1: So black Rock has eight and a half trillion dollars
Speaker 1: under management at the moment, that's trillion with a T.
Speaker 1: It's the world's largest money manager, and it does products
Speaker 1: pretty much ranging the gamut from you know, the most
Speaker 1: sort of index benchmark exchange traded funds, things tied to
Speaker 1: the SMP all the way through customized hedge funds and
Speaker 1: private equity. They're also, you know, since they're founding, they've
Speaker 1: been heavily involved in technology that analyzes risk and financial markets,
Speaker 1: and they kind of use it for the backbone of
Speaker 1: both their business as well as for their clients. So
Speaker 1: clients kind of can use their technology to analyze risks
Speaker 1: across their portfolios. So, uh, they're a massive firm. There
Speaker 1: are across markets, there are across geographies, and they're heavily
Speaker 1: involved in kind of the backbone technology of financial markets.
Speaker 1: And why are they now involved in crypto? So, I mean,
Speaker 1: I think black Rock has been watching crypto and digital
Speaker 1: asset markets much like many players in the financial industry,
Speaker 1: and you know, if you go back a few years ago,
Speaker 1: they were quite reluctant, like many sort of traditional financial players,
Speaker 1: to actually jump into crypto markets. And they're they basically
Speaker 1: say that they're acting now in response to demand that
Speaker 1: they see from their big institutional clients. So when their
Speaker 1: clients want to get into digital assets, namely and specifically
Speaker 1: bitcoin in their case, you know, they kind of feel
Speaker 1: like they have a business and kind of meeting their
Speaker 1: clients where they want to go and you achieve what's
Speaker 1: in as for coin base, so this is really a
Speaker 1: much needed validation for coin based, a company which has
Speaker 1: been through a lot especially he winds so far this year.
Speaker 1: We know that coin base UM laid off eighteen percent
Speaker 1: of staff, their stock has been dropping along with the
Speaker 1: the collapse of crypto prices. They also had to navigate
Speaker 1: some regulatory uncertainty with their their products, and we know
Speaker 1: that they've disclosed certain investigations by the SEC. So for
Speaker 1: a long time, I think the news that we've covered
Speaker 1: for coin base is really just negative for the company,
Speaker 1: and this black Rock do or is really a validation
Speaker 1: to show that coin based, as the biggest US crypto exchange,
Speaker 1: is still very much a giant in the industry, is
Speaker 1: able to sign on the biggest companies from other industries.
Speaker 1: Black Rock including UM and then Meta, the parent company
Speaker 1: of Facebook, is another example to to help them get
Speaker 1: on board with the crypto economy. So from coin basis perspective,
Speaker 1: and you know, to your point about this is good
Speaker 1: news for them. I think their shares were up like
Speaker 1: fifteen percent on the day when this news was announced.
Speaker 1: So coin bases getting institutional credibility from having a partnership with,
Speaker 1: as Stila explained, the biggest asset manager or money manager
Speaker 1: in the world. And you know, solo like black Rock
Speaker 1: is getting um kind of crypto credit. Right, You've got
Speaker 1: this very large, very established Wall Street giant now able
Speaker 1: to offer exposure and access to its institutional clients and
Speaker 1: way that feels less risky perhaps than some of the alternatives.
Speaker 1: But what specifically is this partnership about, Like, what does
Speaker 1: it enable them to do? There were two developments in
Speaker 1: the last month or so. The first is a partnership
Speaker 1: with coin base that allows clients of both companies to
Speaker 1: use Black Rocks technology, which is called a Latin to
Speaker 1: essentially monitor their risk and their exposures to bitcoin alongside
Speaker 1: all the other kind of assets stocks and bonds, derivatives,
Speaker 1: other kinds of assets that they have in their portfolio.
Speaker 1: So it was essentially an effort to kind of bring
Speaker 1: into the Black Rocks sort of technology fold bitcoin alongside
Speaker 1: all these other assets, and it was a partnership that
Speaker 1: then allows clients to kind of monitor their exposures at
Speaker 1: black Rock and then also use coin based to trade bitcoin.
Speaker 1: The second announcement was a black Rock product, a private
Speaker 1: trust product that allows large institutional investors to invest in
Speaker 1: big and you achieve you know, one of the things
Speaker 1: you've been reporting on obviously is you know, coin based
Speaker 1: earnings over the past several quarters and months, and you
Speaker 1: noted in this the story that you and Solo worked
Speaker 1: on that institutional investors accounted for about three quotas of
Speaker 1: overall coin based trading volume in Q one two and
Speaker 1: that training volume was you know, upwards of three billion dollars.
Speaker 1: So coin base clearly has an existing institutional user base.
Speaker 1: But this is also a way for them to allay
Speaker 1: some of the concerns elsewhere on wall streets about the
Speaker 1: fact that their retail business seems to be stagnating a
Speaker 1: little bit. Right While even though institutional users make up
Speaker 1: the majority of the training volume on coin base, coin
Speaker 1: based do generates most of his revenue from retail users,
Speaker 1: and the company management noted during their earning scud that
Speaker 1: they're still expecting retail users to sit on the sideline
Speaker 1: during the following quarter, just because we're still pretty much
Speaker 1: in the downturn in the cryptal market, and usually during
Speaker 1: crypto winter, retails are are more um less encouraged or
Speaker 1: or just not participating as much with treating and investing
Speaker 1: in crypto. So Quein bas is indeed a well recognized
Speaker 1: name among the institutional players, especially in the US. They're
Speaker 1: the first public company that gives them a lot of credibility.
Speaker 1: But then at the same time, we also recently wrote
Speaker 1: a story about the decline market share of Quein based
Speaker 1: on a global level, and um the reason being that
Speaker 1: Quein base doesn't have derivative products offering to the retail investors,
Speaker 1: and then a lot of the cryptal treating volumes are
Speaker 1: in the derivative space, so that means that those volumes
Speaker 1: are mostly being down over at exchanges abroad. So this
Speaker 1: is kind of you're describing something that an analysts speak
Speaker 1: would be a combination of headwinds and tail winds. They have,
Speaker 1: they have some stuff going for them and some things
Speaker 1: that are a little bit more challenging. I want to
Speaker 1: go back to what you mentioned though about you know,
Speaker 1: Goldman Sachs having previously done some work with with coin base,
Speaker 1: because it sounds to me like one of coin bases
Speaker 1: ambitions has really to become like the go to for
Speaker 1: Wall Street. Like, if Wall Street is going to do
Speaker 1: a crypto thing, you they should come to a crypto
Speaker 1: thing with coin base. Is there are there any other
Speaker 1: crypto companies that are trying to challenge that ambition? Well,
Speaker 1: I always say f t x in the US will
Speaker 1: be another key player. F t x U s also
Speaker 1: has UM has been investing a lot in the US market.
Speaker 1: They started UM from overseas market, but they've since launched
Speaker 1: in the US. They actually also recently expanded into equities trading,
Speaker 1: which is their attempt to capture a broader based of users,
Speaker 1: including the ming Stock retail investors. So they're seeing as
Speaker 1: another strong competitor UM in the US. Up next, you'll
Speaker 1: hear more from Bloomberg reports, uh Gang, and still a
Speaker 1: brush about the Wall Street partnership that's trying to bridge
Speaker 1: the gap between trad FI and defy black Rock partnering
Speaker 1: with coin based to make it easier for institutional investors
Speaker 1: to manage and trade bitcoin. But and so I want
Speaker 1: to go back to you know the second part of
Speaker 1: the black Rock deal, which is this private trust that
Speaker 1: you mentioned. There's a quote in or a reference in
Speaker 1: in the story that you wrote about this that said,
Speaker 1: you know, Larry Fink, who's the CEO of black Rock,
Speaker 1: said up to four years ago he just hadn't heard
Speaker 1: of any interest from clients seeking exposure to crypto. That's
Speaker 1: obviously changed enough for for them to be offering this
Speaker 1: right now. You report on lots of different major institutional
Speaker 1: investors asset manages. What are some of the to use
Speaker 1: a word we like to use here, like, what's the
Speaker 1: vibe shift that you're getting in terms of why these
Speaker 1: folks are increasingly comfortable with and why their clients are
Speaker 1: increasingly interested in this asset class Relative to Bitcoin, I
Speaker 1: think many larger traders feel like it is on relatively
Speaker 1: sure footing or more more stable footing than maybe some
Speaker 1: of the other smaller tokens in the digital market. So
Speaker 1: where you see the greatest interest from maybe the the biggest,
Speaker 1: most established traditional financial players are in those areas, those
Speaker 1: products which are on that kind of sure finn and
Speaker 1: financial and regulatory footing. I don't think it's a shock
Speaker 1: that bitcoin is the one that you know, people are
Speaker 1: most comfortable with. And there's those couple of factors I
Speaker 1: think that make the vibe feel different now, even in
Speaker 1: the depths of whether it's you call it crypto winter
Speaker 1: or just the meltdown that we've seen in the crypto
Speaker 1: Marcus this year. Like I think, you know, so so
Speaker 1: many people's initial reaction this this year was like that's interesting,
Speaker 1: but like why now, like the market has plunged, And
Speaker 1: I think the answer to that is about this kind
Speaker 1: of shift in mindset that some large financial players have
Speaker 1: had in the sense that like the regulatory setting is
Speaker 1: sort of more comfortable and sure now for at least
Speaker 1: some products than it was three or four or five
Speaker 1: years ago. They're more traditional institutional players in the market,
Speaker 1: so there's a kind of critical mass effect, and uh,
Speaker 1: that's sort of why the vibe does feel different, at
Speaker 1: least relative to certain digital assets. U A. G. One
Speaker 1: of the you know, kind of storylines that you've been
Speaker 1: reporting out and you know, we've we've sort of written
Speaker 1: several stories about this is the kind of this revolving
Speaker 1: door of folks leaving traditional Wall Street firms and banks
Speaker 1: and asset managers going to crypto, starting their own thing.
Speaker 1: Crypto joining crypto companies sometimes going back to those more
Speaker 1: traditional places, or you know, starting a crypto thing and
Speaker 1: those more traditional places. Is there anything that you've observed
Speaker 1: and you're reporting about the culture of these crypto companies
Speaker 1: that pose either opportunities or challenges in these more traditional partnerships. Hmm,
Speaker 1: that's a good question. I think even within the crypto industry,
Speaker 1: there's such a vast range of different types of companies,
Speaker 1: each with their different culture, so it's really hard to
Speaker 1: just calcularize it in one way. But I think in general,
Speaker 1: we know that the traditional finance industry is heavily regulated
Speaker 1: and the executive stars are are very much used to
Speaker 1: playing by rules and um, getting clear errands um for
Speaker 1: everything that they do or everything they say, for example,
Speaker 1: and then when they joined the crypto company, UM, we
Speaker 1: know that the industry is still very much exploring a
Speaker 1: lot of services and how they how they promote themselves,
Speaker 1: and then they're in talks with regulators to figure out
Speaker 1: the rules. So it is a work in progress, and
Speaker 1: we've heard of executives talking about how after they switched
Speaker 1: to crypto companies they not have to learn how to
Speaker 1: talk directly on Twitter for example, UM and to stand
Speaker 1: out along Twist West and as as their main form
Speaker 1: of communication, which is very different from what they used
Speaker 1: to do, which would have been getting approval from a
Speaker 1: communication person, sending out a press release, et cetera. So
Speaker 1: I think there are cultural changes that they have to
Speaker 1: adapt to. But then at the same time, UM cryptal
Speaker 1: companies UM differ from each other. Working at coin based
Speaker 1: UM will give you a very different experience than working
Speaker 1: for some of the cryptal startup that quh G and
Speaker 1: thank you Sila. You can find more of h G
Speaker 1: and silas reporting on the Bloomberg terminal on Bloomberg dot
Speaker 1: com or follow them on Twitter. UH is at U
Speaker 1: underscore young That's why U e q I underscore y
Speaker 1: A n G and Sila is at s A brush
Speaker 1: b R U s H on the next episode of
Speaker 1: Bloomberg Crypto. Why is there an image of a whale
Speaker 1: on the sleeves of the official uniform of the Chelsea
Speaker 1: Football Club? Why does a drone racing league need a
Speaker 1: crypto sponsor? And can crypto companies even afford to continue
Speaker 1: to spend billions of dollars of advertising in a market downturn?
Speaker 1: Crypto companies have committed two point four billion or more
Speaker 1: on sports marketing just over the past eighteen months. We'll
Speaker 1: talk about all of this in the latest episode on crypto,
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