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Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,

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Speaker 1: and this is Bloomberg Crypto, a daily Bloomberg I Heard podcast.

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Speaker 1: It's Thursday, June six. It's been a wild ride for

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Speaker 1: crypto markets even by the usual standards of volatility, and

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Speaker 1: the main direction prices have been heading in is down.

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Speaker 1: Bloomberg Reports is Muya Shan and Matt Turner are joining

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Speaker 1: me today to discuss what's been happening to crypto tokens

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Speaker 1: and to crypto related stocks, and to share their reporting

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Speaker 1: on why sentiments in these markets feel so negative right now.

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Speaker 1: It is my pleasure to be joined in studio by

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Speaker 1: not one, but two Bloomberg Reports is today, which is

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Speaker 1: always a real thrill. I have muyao Chen, who is

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Speaker 1: a crypto reporter here at Bloomberg, and Matt Turner, who's

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Speaker 1: coming at this from the equities perspective. The reason they're

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Speaker 1: both here is because, well, there's a lot of going

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Speaker 1: on to markets, and we wanna just make sure that

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Speaker 1: we're addressing that and understand how this plays into so

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Speaker 1: many of the other themes that are happening in crypto

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Speaker 1: right now. Matt, I'll start with you. What's going on. Yeah,

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Speaker 1: that's a great question, and thank you for having me.

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Speaker 1: I think, first of all, the market, clearly in terms

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Speaker 1: from the equity perspective, is very down right now. The

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Speaker 1: SMP to bear market this week, um you know, so

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Speaker 1: stock and the bear market is like down more than

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Speaker 1: down from its peak. Um So stocks are way down.

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Speaker 1: Obviously that's a different story compared to how far crypto

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Speaker 1: is down. But I'll stick with the stock side of things.

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Speaker 1: You know, it's it's all coming mostly from worries about

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Speaker 1: the U. S. Economy. I mean, the FED has been

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Speaker 1: raising rates recently. You know, they're trying to cap inflation,

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Speaker 1: which as of this month I believe hit eight point

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Speaker 1: six percent, which was the highest and something like forty

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Speaker 1: years um so in the US in the US correct. Yeah,

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Speaker 1: So inflation has been a big concern and the FED

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Speaker 1: has been trying to cool that off by raising rates.

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Speaker 1: And there are a lot of worries that that's going

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Speaker 1: to sink the U. S. Economy into a recession this year,

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Speaker 1: maybe next year, but at some point. And that is

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Speaker 1: really weighing on the sentiment for stocks right now. So

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Speaker 1: the whole market is down at this point. So the

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Speaker 1: whole market is down, But why are crypto stocks down

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Speaker 1: in particular? Sure, yeah, so crypto stocks obviously are very

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Speaker 1: correlated to bitcoin and the broader crypto market. And you know,

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Speaker 1: with Bitcoin down maybe in half maybe more this year,

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Speaker 1: you know, the stocks are sort of following that along.

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Speaker 1: A lot of the stocks that are crypto related are

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Speaker 1: bitcoin miners, and so obviously they make less money from

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Speaker 1: crypto when bitcoin is trading at twenty dollars versus when

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Speaker 1: it was trading at so investors are pricing that into

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Speaker 1: the stocks and that is resulting in them being way

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Speaker 1: way down this year. But what about you know, we've

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Speaker 1: seen coin based this week announced that they were going

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Speaker 1: to do layoffs. That follows them saying that they were

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Speaker 1: doing a hiring freeze resending job offers. But they haven't

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Speaker 1: only had a bad week though. Yeah, yeah, coin base

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Speaker 1: is especially bad. They're down, you know, more than sevent

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Speaker 1: this year. They their direct listing last year, and it

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Speaker 1: has basically been a straight down line to the right,

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Speaker 1: uh since they listed, which is which is not No,

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Speaker 1: it's not, it's not the direction you want to see.

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Speaker 1: Up into the right would be better. Down into the

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Speaker 1: right means your money is getting smaller. Coin based has

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Speaker 1: has had a lot of problems. Um, they've seen declining volumes. Obviously,

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Speaker 1: the price of of bitcoin and other cryptocurrencies going down

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Speaker 1: makes it less attractive for people to trade, gets fewer

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Speaker 1: people into the market. You know, a lot of people

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Speaker 1: want to make money that I want to see the

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Speaker 1: market going downwards. So it's kind of weighing on that.

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Speaker 1: As you said, they went through a hiring freeze, but

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Speaker 1: prior to that they were hiring like crazy. I believe

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Speaker 1: before this latest round of job cuts they had something

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Speaker 1: like five thousand employees, which was up you know, four

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Speaker 1: times from from a year prior to that. So, um,

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Speaker 1: that's a lot of expenses. Um, they're hiring engineers, they're

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Speaker 1: building out different products, and so you know, investors don't

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Speaker 1: like to see high expenses when you know your profits

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Speaker 1: are not keeping up with that. And another name that's

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Speaker 1: you know you hear a lot in a too context

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Speaker 1: is micro Strategy. What's micro strategy and why are they

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Speaker 1: considered a crypto equity? Yeah, so micro strategy is a

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Speaker 1: fun one. They are technically a software company, um, but

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Speaker 1: then they like actually make software as and they actually

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Speaker 1: make software. Yeah, I believe it or not, but if

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Speaker 1: you looked at a price chart of micro strategy versus

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Speaker 1: a price chart of bitcoin, you would be pretty convinced

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Speaker 1: that it's just a bitcoin et F or something and

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Speaker 1: an exchange traded fund. Yeah. Yeah, they are just perfectly

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Speaker 1: correlated to each other. And that's because starting CEO started

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Speaker 1: putting bitcoin on their bounce sheets, so he essentially said

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Speaker 1: that it was a nice hedge against inflation. So instead

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Speaker 1: of holding cash or you know, other securities, he said,

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Speaker 1: you know, bitcoin is the future, and we're just going

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Speaker 1: to start buying bitcoin and holding on our balance sheet.

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Speaker 1: And obviously, when times are good and bitcoin is going up,

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Speaker 1: that's great for the stock. The value of your bitcoin

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Speaker 1: that he's holding goes up. Obviously there's the downside of that.

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Speaker 1: When bitcoin is following, the value that you have goes

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Speaker 1: way way down. So at different points throughout this year,

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Speaker 1: we've seen, you know, the value that they're holding in

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Speaker 1: bitcoin b less than their actual market cap, which is

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Speaker 1: a little bizarre. Explain what that means. So it's like

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Speaker 1: there's this difference between how much they're actually worth depending

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Speaker 1: on the metric that you're looking at. Right, Yeah, so

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Speaker 1: there is their market cap, which is basically how investors

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Speaker 1: value them. It's their share price times you know, the

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Speaker 1: number of shares outstanding in the market, and typically speaking,

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Speaker 1: you would not see a company have cash or you know,

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Speaker 1: liquid assets like bitcoin exceed their market cap because it

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Speaker 1: basically means that you're discounting the value of those basically

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Speaker 1: like the software services like exactly. Yeah, so you're you're

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Speaker 1: essentially saying that their bitcoin is not worth what the

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Speaker 1: entire company is worth, which the numbers don't line up.

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Speaker 1: So it's a very interesting phenomenon that's been going on,

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Speaker 1: and it has gotten worse as the price of bitcoin

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Speaker 1: has declined. Why is the price of bit going going

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Speaker 1: down right now? What are some of the factors that

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Speaker 1: are at play here? I think outside what Matt just mentioned,

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Speaker 1: there's been a lot of panic just specific in crypto

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Speaker 1: that's spreading across the market. People are spooked away from

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Speaker 1: the space in general, and I think sometimes we forget

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Speaker 1: to mention that how small the cryptal market versus the

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Speaker 1: equity market or the commodity markets A trillion dollars at

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Speaker 1: the moment. Yeah, unfortunately, Um, yeah, So I think any

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Speaker 1: sort of capital going away from the market can cause

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Speaker 1: much bigger problems in this market specifically versus you know,

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Speaker 1: the equity or whatsoever. I think in general what we're

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Speaker 1: seeing is that, for example, in May, we had a

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Speaker 1: specific event that's just in crypto, with the collapses the

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Speaker 1: Terror blockchain. I think that definitely costs even more panic,

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Speaker 1: even among a lot of crypto native investors, because those

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Speaker 1: are the people who in general kind of set up

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Speaker 1: the bottom of the market. But they're been hurt by

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Speaker 1: either their exposure in Terror blockchain, or their investment inter

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Speaker 1: related funds or the tokens directly, all tolken directly, they

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Speaker 1: are not able at the moment to save the market

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Speaker 1: or kind of build up the bottom for this market.

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Speaker 1: So in general, or just being even much more parish

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Speaker 1: in this space versus the rest of the word. We'll

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Speaker 1: be right back with more from Bloomberg reporters Muya Shan

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Speaker 1: and Matt Turner. So there's this idea in crypto of

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Speaker 1: you know, like in equities, you'll hear about the plunge

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Speaker 1: Protection Team. This idea that there are these entities that

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Speaker 1: come in and they're like, Okay, it's too low, time

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Speaker 1: to buy some stuff, and that props prices up and

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Speaker 1: there are various players, very large players generally in crypto,

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Speaker 1: who have, whether they might appreciate that description or not,

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Speaker 1: you know, engaged in very similar kinds of practices. What

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Speaker 1: has been one of the things that happened in the

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Speaker 1: past week or so that really spooked those folks and

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Speaker 1: people are now saying like this kind of a terror

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Speaker 1: two point oh. Obviously, the big thing that happened in

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Speaker 1: the past a week or so is the needs that

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Speaker 1: came out from Celsius, which is one of the biggest

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Speaker 1: crypto lenders in this space. They all of sudden told

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Speaker 1: everyone on Sunday, Sunday night, Sunday night that they're gonna

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Speaker 1: pause all the with strongs, swaps and other activities on

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Speaker 1: the platform. And what that means in practices like their

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Speaker 1: crypto lender, so they're they're kind of a bank for crypto.

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Speaker 1: You can borrow crypto from them, you can like give

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Speaker 1: them your cryptos a lend to other people and you

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Speaker 1: get a yield. So then posing withdrawals would be like

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Speaker 1: if I walked up to my back branch and I

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Speaker 1: was like, I would like my money please, and they

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Speaker 1: were just like no, yeah, Well, Celsius has definitely be

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Speaker 1: very careful and not being called a bank. If you

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Speaker 1: go to their website, they say they're Celsius is not

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Speaker 1: a bank, you know, even though your park your crypto

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Speaker 1: asis without saying guinea eiels from us that it's not

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Speaker 1: protected by any sort of gold federal insurance. Ye. So

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Speaker 1: I'm let's say I had been one of those people

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Speaker 1: who had, you know, put money in or will put

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Speaker 1: crypto into Celsius or one of its products. What is

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Speaker 1: my life like right now? Very sad? I think, you know,

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Speaker 1: as you see prices going down in general, I think

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Speaker 1: the first stopful lot of traders or investors in crypto

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Speaker 1: is kind of rushing to park their assets in stable coins,

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Speaker 1: which are a specific type of cryptocurrency that are supposed

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Speaker 1: to trade as a very stable value, such as you know,

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Speaker 1: they usually packed to the US dollars for example, when

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Speaker 1: you have like whilst wins in crypto in general. But

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Speaker 1: right now, these people they're just stuck with this fact

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Speaker 1: that they cannot get their crypo assets out of Celsius.

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Speaker 1: They cannot get the cash they wanted because all these

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Speaker 1: are basically throw freeze at the moment. So they're watching

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Speaker 1: prices go down and they're not even able to sell

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Speaker 1: right now? Correct at sounds not fun for anyone involved.

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Speaker 1: But why is like why is Celsius? Why is them

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Speaker 1: freezing withdrawals and as you say, swaps and other activities,

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Speaker 1: Like why do people perceive that is such a big deal?

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Speaker 1: Like what is their sort of systemic indicata in this ecosystem?

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Speaker 1: I think right now we're still observing in general houses

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Speaker 1: event is going to affect the broader market in general.

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Speaker 1: But they have been weeks since speculations around how Celsius

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Speaker 1: might be having problems with their business in general, all

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Speaker 1: of which they've you know, consistently denied up to and

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Speaker 1: including the points where they froze withdrawals. Yes, um I,

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Speaker 1: from my understanding, the big problem they're facing is this

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Speaker 1: liquidit crunch. As we talked earlier, crypto markets in general

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Speaker 1: is much smaller than any of the other as a market,

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Speaker 1: and so it's it's highly sensitive to liquidity issues. So, um,

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Speaker 1: my understanding, we cannot say that specific that Celsius are

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Speaker 1: having issues in terms fully return funds to their clients.

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Speaker 1: It's more of a problem of liquid They don't have

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Speaker 1: enough equality to pay back the massive amount of request

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Speaker 1: from people trying to leave. So, in other words, if

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Speaker 1: we had been dealing with normal market conditions and you know,

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Speaker 1: kind of like a consistent number of people, a predictable

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Speaker 1: number were like trying to get their money in or

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Speaker 1: out at any point in time, that would be completely fine.

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Speaker 1: The problem arises, and this is, you know, even though

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Speaker 1: they're not a bank, a fairly classic bank run, when

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Speaker 1: you have a lot of people, an unusually high number

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Speaker 1: of people, all requesting all of their stuff back at once,

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Speaker 1: in which case you're like, okay, this is a problem

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Speaker 1: because you don't necessarily have that on hand in the

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Speaker 1: moment that folks want those withdrawals. Have they given a

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Speaker 1: timeline for when they think they would be able to

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Speaker 1: unfreeze transactions? I think it's hard to tell. Based on

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Speaker 1: all the interviews that have done, and you know, talking

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Speaker 1: to a lot of people who are familiar with Salsius business,

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Speaker 1: it's optimistic to say that it's gonna be weeks and

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Speaker 1: how do you possible it's going to be monsters before

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Speaker 1: they can restart, and who knows what crypto will look

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Speaker 1: like in some months. Well, actually, I want to turn

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Speaker 1: back to you because analysts love to make predictions about

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Speaker 1: this what are you know? You have been rising about

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Speaker 1: some interesting and sometimes counterintuitive analyst commentary. What's the vibe

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Speaker 1: among these like market prognosticatas, What are they seeing? What

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Speaker 1: are they expecting? Yeah, so from an equity market standpoint,

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Speaker 1: it's very uncertain. I would say at this point. There's

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Speaker 1: definitely the crowd that says that a US OR session

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Speaker 1: is coming, which is gonna weigh on stocks more. Obviously

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Speaker 1: that would lead to further downside, which is not good

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Speaker 1: for both stocks broadly and crypto stocks especially especially. Yeah,

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Speaker 1: they I think most people would consider them some of

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Speaker 1: the riskiest stocks that you could get into. So there's

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Speaker 1: a large group of analysts that that kind of believes that.

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Speaker 1: And then there's the flip side of that, which you know,

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Speaker 1: there's people that say, you know, the feed is going

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Speaker 1: to get inflation under control, it's gonna help stabilize the market,

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Speaker 1: and stocks are gonna go up. You know. I think

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Speaker 1: if you look at price targets for the SMP five hundred,

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Speaker 1: there's something like thirty or foorty percent above where it's

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Speaker 1: trading right now, which means that people expected to go

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Speaker 1: higher in the future. Yeah, and a return over over

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Speaker 1: a year's is pretty amazing. You know. The average that

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Speaker 1: I think when I was growing up that everybody always

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Speaker 1: quoted was, you know, if you get an eight percent

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Speaker 1: return over your entire lifetime, that's pretty great. So in

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Speaker 1: a year is tremendous. Even with where we are right now. Well,

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Speaker 1: you know, to your point about risk, one of the things,

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Speaker 1: and we've we've covered it on this podcast is the

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Speaker 1: direction in which stocks move in the direction in which

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Speaker 1: bitcoin moves is increasingly looking like the same direction. And

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Speaker 1: so part of what crypto folks are saying is this

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Speaker 1: challenging macro economic environment is weighing on them in the

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Speaker 1: same way that's weighing on other people. You know. Brian

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Speaker 1: Armstrong and the CEO of coin Base, in his blog

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Speaker 1: post in which he revealed that he was cutting nearly

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Speaker 1: twenty percent of the team, did site, you know, a recession,

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Speaker 1: of the possibility of a recession as a factor that

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Speaker 1: they were they were considering. So we're really in an

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Speaker 1: environment in which kind of everything is everything all at once? Yeah, Yeah,

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Speaker 1: And I think you know, obviously, you know, the economy

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Speaker 1: weighs on everybody, and crypto stocks are not exempt from that.

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Speaker 1: Um And I think the job cuts definitely reflect not

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Speaker 1: only the outlook for the economy, but also you know,

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Speaker 1: the outlook for crypto in general. He also mentioned, you know,

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Speaker 1: a crypto winter coming, which some would say we've been

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Speaker 1: in it. Yes, yeah, I would agree. And you know,

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Speaker 1: one of the things that you know, I talked with

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Speaker 1: with a few people um at Bloomberg today was, you know,

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Speaker 1: the the idea of a crypto winter actually implies that

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Speaker 1: you know, a spring is coming afterwards. And you know,

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Speaker 1: I don't know how your guys thoughts on on that are,

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Speaker 1: but I don't know if that's a certainty at this point,

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Speaker 1: given you know how how young and small the crypto

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Speaker 1: space isn't in general, right, so going to be a

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Speaker 1: deep freeze? What what's the what's the groundhold day for

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Speaker 1: a crypto Well, thank you, thank you Matt, and thank

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Speaker 1: you Muo. Really appreciate you taking the time, in this

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Speaker 1: particularly busy moment for both your asset classes to share

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Speaker 1: your thoughts with us. Thanks for having You can find

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Speaker 1: more of their reporting on the Bloomberg terminal on Bloomberg

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Speaker 1: dot com and they're both on Twitter. Muaw is at

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Speaker 1: Muyao Chen and Matt is at Matt underscore turner with

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Speaker 1: two rs. That's t U R N E r R.

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Speaker 1: On the next episode of Bloomberg Crypto, we take another

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Speaker 1: look at what's happening with US regulation. The bipartisan due

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Speaker 1: of Democratic Senator Kristen Gillibrand of New York and Republican

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Speaker 1: Senator Cynthia Lumis of Wyoming just released their own version

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Speaker 1: of proposed crypto legislation. Their bill aims to clarify the

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Speaker 1: rules of how two very different government oversight agencies, the

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Speaker 1: CFTC and the SEC, would divvy up the crypto landscape.

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Speaker 1: It also contains a proposal for regulating crypto mining, which

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Speaker 1: is an increasingly hot button issue as it relates to

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Speaker 1: the environmental impact of bitcoin. But Candice bill pass and

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Speaker 1: how would it work? I'll talk with Bloomberg reporter Alison

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Speaker 1: ver Sprilled for the latest. I'm Stacy Marie Ishmael and

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Speaker 1: this is Bloomberg Crypto, a daily podcast from bloom Burg

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Speaker 1: and I Heart Radio. For more shows from I heart Radio,

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Speaker 1: visit the i heart Radio app, Apple Podcasts, or wherever

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Speaker 1: you get your podcasts. Email your questions, comments or suggestions

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Speaker 1: for the show to Crypto at Bloomberg dot Net and

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Speaker 1: you'll find us on Twitter at Crypto. The producer and

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Speaker 1: editor of this episode is Vicky Vergalina. Associate producer is

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Speaker 1: Ty Butler. Desta wonder At is our engineer. Original music

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Speaker 1: by Leo Sidron. Bloomberg's head of Podcasts is Francesca Levi