WEBVTT - Celsius Casts a Chill

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

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<v Speaker 1>and this is Bloomberg Crypto, a daily Bloomberg I Heard podcast.

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<v Speaker 1>It's Thursday, June six. It's been a wild ride for

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<v Speaker 1>crypto markets even by the usual standards of volatility, and

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<v Speaker 1>the main direction prices have been heading in is down.

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<v Speaker 1>Bloomberg Reports is Muya Shan and Matt Turner are joining

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<v Speaker 1>me today to discuss what's been happening to crypto tokens

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<v Speaker 1>and to crypto related stocks, and to share their reporting

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<v Speaker 1>on why sentiments in these markets feel so negative right now.

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<v Speaker 1>It is my pleasure to be joined in studio by

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<v Speaker 1>not one, but two Bloomberg Reports is today, which is

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<v Speaker 1>always a real thrill. I have muyao Chen, who is

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<v Speaker 1>a crypto reporter here at Bloomberg, and Matt Turner, who's

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<v Speaker 1>coming at this from the equities perspective. The reason they're

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<v Speaker 1>both here is because, well, there's a lot of going

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<v Speaker 1>on to markets, and we wanna just make sure that

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<v Speaker 1>we're addressing that and understand how this plays into so

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<v Speaker 1>many of the other themes that are happening in crypto

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

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

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<v Speaker 1>I think, first of all, the market, clearly in terms

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<v Speaker 1>from the equity perspective, is very down right now. The

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<v Speaker 1>SMP to bear market this week, um you know, so

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<v Speaker 1>stock and the bear market is like down more than

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<v Speaker 1>down from its peak. Um So stocks are way down.

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<v Speaker 1>Obviously that's a different story compared to how far crypto

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

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<v Speaker 1>You know, it's it's all coming mostly from worries about

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<v Speaker 1>the U. S. Economy. I mean, the FED has been

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

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<v Speaker 1>which as of this month I believe hit eight point

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<v Speaker 1>six percent, which was the highest and something like forty

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<v Speaker 1>years um so in the US in the US correct. Yeah,

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<v Speaker 1>So inflation has been a big concern and the FED

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<v Speaker 1>has been trying to cool that off by raising rates.

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<v Speaker 1>And there are a lot of worries that that's going

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<v Speaker 1>to sink the U. S. Economy into a recession this year,

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<v Speaker 1>maybe next year, but at some point. And that is

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<v Speaker 1>really weighing on the sentiment for stocks right now. So

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<v Speaker 1>the whole market is down at this point. So the

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<v Speaker 1>whole market is down, But why are crypto stocks down

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<v Speaker 1>in particular? Sure, yeah, so crypto stocks obviously are very

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<v Speaker 1>correlated to bitcoin and the broader crypto market. And you know,

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<v Speaker 1>with Bitcoin down maybe in half maybe more this year,

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<v Speaker 1>you know, the stocks are sort of following that along.

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<v Speaker 1>A lot of the stocks that are crypto related are

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<v Speaker 1>bitcoin miners, and so obviously they make less money from

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<v Speaker 1>crypto when bitcoin is trading at twenty dollars versus when

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<v Speaker 1>it was trading at so investors are pricing that into

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<v Speaker 1>the stocks and that is resulting in them being way

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

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<v Speaker 1>seen coin based this week announced that they were going

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<v Speaker 1>to do layoffs. That follows them saying that they were

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<v Speaker 1>doing a hiring freeze resending job offers. But they haven't

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<v Speaker 1>only had a bad week though. Yeah, yeah, coin base

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

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<v Speaker 1>this year. They their direct listing last year, and it

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<v Speaker 1>has basically been a straight down line to the right,

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<v Speaker 1>uh since they listed, which is which is not No,

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<v Speaker 1>it's not, it's not the direction you want to see.

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<v Speaker 1>Up into the right would be better. Down into the

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<v Speaker 1>right means your money is getting smaller. Coin based has

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

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<v Speaker 1>the price of of bitcoin and other cryptocurrencies going down

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<v Speaker 1>makes it less attractive for people to trade, gets fewer

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<v Speaker 1>people into the market. You know, a lot of people

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<v Speaker 1>want to make money that I want to see the

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<v Speaker 1>market going downwards. So it's kind of weighing on that.

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<v Speaker 1>As you said, they went through a hiring freeze, but

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<v Speaker 1>prior to that they were hiring like crazy. I believe

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<v Speaker 1>before this latest round of job cuts they had something

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<v Speaker 1>like five thousand employees, which was up you know, four

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<v Speaker 1>times from from a year prior to that. So, um,

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

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<v Speaker 1>building out different products, and so you know, investors don't

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<v Speaker 1>like to see high expenses when you know your profits

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<v Speaker 1>are not keeping up with that. And another name that's

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<v Speaker 1>you know you hear a lot in a too context

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<v Speaker 1>is micro Strategy. What's micro strategy and why are they

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<v Speaker 1>considered a crypto equity? Yeah, so micro strategy is a

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<v Speaker 1>fun one. They are technically a software company, um, but

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<v Speaker 1>then they like actually make software as and they actually

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<v Speaker 1>make software. Yeah, I believe it or not, but if

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<v Speaker 1>you looked at a price chart of micro strategy versus

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<v Speaker 1>a price chart of bitcoin, you would be pretty convinced

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<v Speaker 1>that it's just a bitcoin et F or something and

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<v Speaker 1>an exchange traded fund. Yeah. Yeah, they are just perfectly

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<v Speaker 1>correlated to each other. And that's because starting CEO started

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<v Speaker 1>putting bitcoin on their bounce sheets, so he essentially said

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<v Speaker 1>that it was a nice hedge against inflation. So instead

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<v Speaker 1>of holding cash or you know, other securities, he said,

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<v Speaker 1>you know, bitcoin is the future, and we're just going

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<v Speaker 1>to start buying bitcoin and holding on our balance sheet.

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<v Speaker 1>And obviously, when times are good and bitcoin is going up,

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<v Speaker 1>that's great for the stock. The value of your bitcoin

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<v Speaker 1>that he's holding goes up. Obviously there's the downside of that.

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<v Speaker 1>When bitcoin is following, the value that you have goes

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<v Speaker 1>way way down. So at different points throughout this year,

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

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<v Speaker 1>bitcoin b less than their actual market cap, which is

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<v Speaker 1>a little bizarre. Explain what that means. So it's like

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<v Speaker 1>there's this difference between how much they're actually worth depending

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

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<v Speaker 1>there is their market cap, which is basically how investors

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

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<v Speaker 1>number of shares outstanding in the market, and typically speaking,

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<v Speaker 1>you would not see a company have cash or you know,

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<v Speaker 1>liquid assets like bitcoin exceed their market cap because it

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<v Speaker 1>basically means that you're discounting the value of those basically

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<v Speaker 1>like the software services like exactly. Yeah, so you're you're

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<v Speaker 1>essentially saying that their bitcoin is not worth what the

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

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<v Speaker 1>So it's a very interesting phenomenon that's been going on,

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<v Speaker 1>and it has gotten worse as the price of bitcoin

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<v Speaker 1>has declined. Why is the price of bit going going

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<v Speaker 1>down right now? What are some of the factors that

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<v Speaker 1>are at play here? I think outside what Matt just mentioned,

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<v Speaker 1>there's been a lot of panic just specific in crypto

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<v Speaker 1>that's spreading across the market. People are spooked away from

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<v Speaker 1>the space in general, and I think sometimes we forget

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<v Speaker 1>to mention that how small the cryptal market versus the

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<v Speaker 1>equity market or the commodity markets A trillion dollars at

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<v Speaker 1>the moment. Yeah, unfortunately, Um, yeah, So I think any

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<v Speaker 1>sort of capital going away from the market can cause

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<v Speaker 1>much bigger problems in this market specifically versus you know,

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<v Speaker 1>the equity or whatsoever. I think in general what we're

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<v Speaker 1>seeing is that, for example, in May, we had a

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<v Speaker 1>specific event that's just in crypto, with the collapses the

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<v Speaker 1>Terror blockchain. I think that definitely costs even more panic,

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<v Speaker 1>even among a lot of crypto native investors, because those

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<v Speaker 1>are the people who in general kind of set up

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<v Speaker 1>the bottom of the market. But they're been hurt by

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<v Speaker 1>either their exposure in Terror blockchain, or their investment inter

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<v Speaker 1>related funds or the tokens directly, all tolken directly, they

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<v Speaker 1>are not able at the moment to save the market

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<v Speaker 1>or kind of build up the bottom for this market.

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<v Speaker 1>So in general, or just being even much more parish

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<v Speaker 1>in this space versus the rest of the word. We'll

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<v Speaker 1>be right back with more from Bloomberg reporters Muya Shan

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<v Speaker 1>and Matt Turner. So there's this idea in crypto of

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<v Speaker 1>you know, like in equities, you'll hear about the plunge

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<v Speaker 1>Protection Team. This idea that there are these entities that

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

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<v Speaker 1>to buy some stuff, and that props prices up and

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<v Speaker 1>there are various players, very large players generally in crypto,

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<v Speaker 1>who have, whether they might appreciate that description or not,

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<v Speaker 1>you know, engaged in very similar kinds of practices. What

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<v Speaker 1>has been one of the things that happened in the

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<v Speaker 1>past week or so that really spooked those folks and

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<v Speaker 1>people are now saying like this kind of a terror

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<v Speaker 1>two point oh. Obviously, the big thing that happened in

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<v Speaker 1>the past a week or so is the needs that

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<v Speaker 1>came out from Celsius, which is one of the biggest

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<v Speaker 1>crypto lenders in this space. They all of sudden told

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<v Speaker 1>everyone on Sunday, Sunday night, Sunday night that they're gonna

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<v Speaker 1>pause all the with strongs, swaps and other activities on

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<v Speaker 1>the platform. And what that means in practices like their

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<v Speaker 1>crypto lender, so they're they're kind of a bank for crypto.

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<v Speaker 1>You can borrow crypto from them, you can like give

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<v Speaker 1>them your cryptos a lend to other people and you

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<v Speaker 1>get a yield. So then posing withdrawals would be like

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<v Speaker 1>if I walked up to my back branch and I

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<v Speaker 1>was like, I would like my money please, and they

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<v Speaker 1>were just like no, yeah, Well, Celsius has definitely be

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<v Speaker 1>very careful and not being called a bank. If you

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<v Speaker 1>go to their website, they say they're Celsius is not

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<v Speaker 1>a bank, you know, even though your park your crypto

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<v Speaker 1>asis without saying guinea eiels from us that it's not

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<v Speaker 1>protected by any sort of gold federal insurance. Ye. So

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<v Speaker 1>I'm let's say I had been one of those people

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<v Speaker 1>who had, you know, put money in or will put

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<v Speaker 1>crypto into Celsius or one of its products. What is

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<v Speaker 1>my life like right now? Very sad? I think, you know,

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<v Speaker 1>as you see prices going down in general, I think

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<v Speaker 1>the first stopful lot of traders or investors in crypto

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<v Speaker 1>is kind of rushing to park their assets in stable coins,

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<v Speaker 1>which are a specific type of cryptocurrency that are supposed

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<v Speaker 1>to trade as a very stable value, such as you know,

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<v Speaker 1>they usually packed to the US dollars for example, when

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<v Speaker 1>you have like whilst wins in crypto in general. But

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<v Speaker 1>right now, these people they're just stuck with this fact

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<v Speaker 1>that they cannot get their crypo assets out of Celsius.

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<v Speaker 1>They cannot get the cash they wanted because all these

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<v Speaker 1>are basically throw freeze at the moment. So they're watching

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<v Speaker 1>prices go down and they're not even able to sell

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<v Speaker 1>right now? Correct at sounds not fun for anyone involved.

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<v Speaker 1>But why is like why is Celsius? Why is them

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<v Speaker 1>freezing withdrawals and as you say, swaps and other activities,

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<v Speaker 1>Like why do people perceive that is such a big deal?

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<v Speaker 1>Like what is their sort of systemic indicata in this ecosystem?

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<v Speaker 1>I think right now we're still observing in general houses

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<v Speaker 1>event is going to affect the broader market in general.

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<v Speaker 1>But they have been weeks since speculations around how Celsius

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<v Speaker 1>might be having problems with their business in general, all

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<v Speaker 1>of which they've you know, consistently denied up to and

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<v Speaker 1>including the points where they froze withdrawals. Yes, um I,

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<v Speaker 1>from my understanding, the big problem they're facing is this

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<v Speaker 1>liquidit crunch. As we talked earlier, crypto markets in general

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<v Speaker 1>is much smaller than any of the other as a market,

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

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<v Speaker 1>my understanding, we cannot say that specific that Celsius are

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<v Speaker 1>having issues in terms fully return funds to their clients.

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<v Speaker 1>It's more of a problem of liquid They don't have

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<v Speaker 1>enough equality to pay back the massive amount of request

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<v Speaker 1>from people trying to leave. So, in other words, if

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<v Speaker 1>we had been dealing with normal market conditions and you know,

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<v Speaker 1>kind of like a consistent number of people, a predictable

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<v Speaker 1>number were like trying to get their money in or

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<v Speaker 1>out at any point in time, that would be completely fine.

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<v Speaker 1>The problem arises, and this is, you know, even though

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<v Speaker 1>they're not a bank, a fairly classic bank run, when

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<v Speaker 1>you have a lot of people, an unusually high number

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<v Speaker 1>of people, all requesting all of their stuff back at once,

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<v Speaker 1>in which case you're like, okay, this is a problem

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<v Speaker 1>because you don't necessarily have that on hand in the

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<v Speaker 1>moment that folks want those withdrawals. Have they given a

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<v Speaker 1>timeline for when they think they would be able to

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

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<v Speaker 1>all the interviews that have done, and you know, talking

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<v Speaker 1>to a lot of people who are familiar with Salsius business,

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<v Speaker 1>it's optimistic to say that it's gonna be weeks and

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<v Speaker 1>how do you possible it's going to be monsters before

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<v Speaker 1>they can restart, and who knows what crypto will look

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<v Speaker 1>like in some months. Well, actually, I want to turn

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<v Speaker 1>back to you because analysts love to make predictions about

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<v Speaker 1>this what are you know? You have been rising about

0:12:13.000 --> 0:12:17.200
<v Speaker 1>some interesting and sometimes counterintuitive analyst commentary. What's the vibe

0:12:17.320 --> 0:12:20.440
<v Speaker 1>among these like market prognosticatas, What are they seeing? What

0:12:20.480 --> 0:12:24.599
<v Speaker 1>are they expecting? Yeah, so from an equity market standpoint,

0:12:24.679 --> 0:12:27.600
<v Speaker 1>it's very uncertain. I would say at this point. There's

0:12:27.640 --> 0:12:30.760
<v Speaker 1>definitely the crowd that says that a US OR session

0:12:30.800 --> 0:12:33.520
<v Speaker 1>is coming, which is gonna weigh on stocks more. Obviously

0:12:33.600 --> 0:12:35.960
<v Speaker 1>that would lead to further downside, which is not good

0:12:36.000 --> 0:12:40.760
<v Speaker 1>for both stocks broadly and crypto stocks especially especially. Yeah,

0:12:40.800 --> 0:12:43.240
<v Speaker 1>they I think most people would consider them some of

0:12:43.280 --> 0:12:47.160
<v Speaker 1>the riskiest stocks that you could get into. So there's

0:12:47.200 --> 0:12:49.599
<v Speaker 1>a large group of analysts that that kind of believes that.

0:12:49.640 --> 0:12:51.160
<v Speaker 1>And then there's the flip side of that, which you know,

0:12:51.160 --> 0:12:52.480
<v Speaker 1>there's people that say, you know, the feed is going

0:12:52.520 --> 0:12:55.439
<v Speaker 1>to get inflation under control, it's gonna help stabilize the market,

0:12:55.440 --> 0:12:56.720
<v Speaker 1>and stocks are gonna go up. You know. I think

0:12:56.720 --> 0:12:58.800
<v Speaker 1>if you look at price targets for the SMP five hundred,

0:12:58.800 --> 0:13:01.000
<v Speaker 1>there's something like thirty or foorty percent above where it's

0:13:01.040 --> 0:13:03.840
<v Speaker 1>trading right now, which means that people expected to go

0:13:04.200 --> 0:13:07.920
<v Speaker 1>higher in the future. Yeah, and a return over over

0:13:07.960 --> 0:13:10.600
<v Speaker 1>a year's is pretty amazing. You know. The average that

0:13:10.720 --> 0:13:12.640
<v Speaker 1>I think when I was growing up that everybody always

0:13:12.720 --> 0:13:14.240
<v Speaker 1>quoted was, you know, if you get an eight percent

0:13:14.320 --> 0:13:17.319
<v Speaker 1>return over your entire lifetime, that's pretty great. So in

0:13:17.360 --> 0:13:21.080
<v Speaker 1>a year is tremendous. Even with where we are right now. Well,

0:13:21.280 --> 0:13:23.760
<v Speaker 1>you know, to your point about risk, one of the things,

0:13:23.840 --> 0:13:26.480
<v Speaker 1>and we've we've covered it on this podcast is the

0:13:26.559 --> 0:13:28.600
<v Speaker 1>direction in which stocks move in the direction in which

0:13:28.600 --> 0:13:32.160
<v Speaker 1>bitcoin moves is increasingly looking like the same direction. And

0:13:32.200 --> 0:13:34.800
<v Speaker 1>so part of what crypto folks are saying is this

0:13:34.880 --> 0:13:38.560
<v Speaker 1>challenging macro economic environment is weighing on them in the

0:13:38.600 --> 0:13:40.559
<v Speaker 1>same way that's weighing on other people. You know. Brian

0:13:40.640 --> 0:13:43.320
<v Speaker 1>Armstrong and the CEO of coin Base, in his blog

0:13:43.320 --> 0:13:45.440
<v Speaker 1>post in which he revealed that he was cutting nearly

0:13:45.480 --> 0:13:50.360
<v Speaker 1>twenty percent of the team, did site, you know, a recession,

0:13:50.400 --> 0:13:53.480
<v Speaker 1>of the possibility of a recession as a factor that

0:13:53.840 --> 0:13:56.440
<v Speaker 1>they were they were considering. So we're really in an

0:13:56.559 --> 0:13:59.920
<v Speaker 1>environment in which kind of everything is everything all at once? Yeah, Yeah,

0:14:00.000 --> 0:14:02.679
<v Speaker 1>And I think you know, obviously, you know, the economy

0:14:02.679 --> 0:14:07.280
<v Speaker 1>weighs on everybody, and crypto stocks are not exempt from that.

0:14:07.559 --> 0:14:10.480
<v Speaker 1>Um And I think the job cuts definitely reflect not

0:14:10.559 --> 0:14:13.160
<v Speaker 1>only the outlook for the economy, but also you know,

0:14:13.440 --> 0:14:15.880
<v Speaker 1>the outlook for crypto in general. He also mentioned, you know,

0:14:15.880 --> 0:14:18.400
<v Speaker 1>a crypto winter coming, which some would say we've been

0:14:18.440 --> 0:14:21.080
<v Speaker 1>in it. Yes, yeah, I would agree. And you know,

0:14:21.280 --> 0:14:23.160
<v Speaker 1>one of the things that you know, I talked with

0:14:23.160 --> 0:14:25.720
<v Speaker 1>with a few people um at Bloomberg today was, you know,

0:14:25.800 --> 0:14:28.200
<v Speaker 1>the the idea of a crypto winter actually implies that

0:14:28.240 --> 0:14:30.920
<v Speaker 1>you know, a spring is coming afterwards. And you know,

0:14:30.960 --> 0:14:33.320
<v Speaker 1>I don't know how your guys thoughts on on that are,

0:14:33.440 --> 0:14:35.600
<v Speaker 1>but I don't know if that's a certainty at this point,

0:14:35.680 --> 0:14:39.040
<v Speaker 1>given you know how how young and small the crypto

0:14:39.080 --> 0:14:41.040
<v Speaker 1>space isn't in general, right, so going to be a

0:14:41.040 --> 0:14:43.200
<v Speaker 1>deep freeze? What what's the what's the groundhold day for

0:14:43.240 --> 0:14:45.440
<v Speaker 1>a crypto Well, thank you, thank you Matt, and thank

0:14:45.440 --> 0:14:47.680
<v Speaker 1>you Muo. Really appreciate you taking the time, in this

0:14:47.720 --> 0:14:50.400
<v Speaker 1>particularly busy moment for both your asset classes to share

0:14:50.440 --> 0:14:53.760
<v Speaker 1>your thoughts with us. Thanks for having You can find

0:14:53.760 --> 0:14:56.800
<v Speaker 1>more of their reporting on the Bloomberg terminal on Bloomberg

0:14:56.800 --> 0:15:00.240
<v Speaker 1>dot com and they're both on Twitter. Muaw is at

0:15:00.360 --> 0:15:05.480
<v Speaker 1>Muyao Chen and Matt is at Matt underscore turner with

0:15:05.640 --> 0:15:08.720
<v Speaker 1>two rs. That's t U R N E r R.

0:15:11.400 --> 0:15:14.200
<v Speaker 1>On the next episode of Bloomberg Crypto, we take another

0:15:14.280 --> 0:15:17.840
<v Speaker 1>look at what's happening with US regulation. The bipartisan due

0:15:17.920 --> 0:15:21.440
<v Speaker 1>of Democratic Senator Kristen Gillibrand of New York and Republican

0:15:21.480 --> 0:15:25.480
<v Speaker 1>Senator Cynthia Lumis of Wyoming just released their own version

0:15:25.720 --> 0:15:30.280
<v Speaker 1>of proposed crypto legislation. Their bill aims to clarify the

0:15:30.400 --> 0:15:34.120
<v Speaker 1>rules of how two very different government oversight agencies, the

0:15:34.160 --> 0:15:37.560
<v Speaker 1>CFTC and the SEC, would divvy up the crypto landscape.

0:15:37.880 --> 0:15:41.280
<v Speaker 1>It also contains a proposal for regulating crypto mining, which

0:15:41.320 --> 0:15:43.840
<v Speaker 1>is an increasingly hot button issue as it relates to

0:15:43.840 --> 0:15:48.360
<v Speaker 1>the environmental impact of bitcoin. But Candice bill pass and

0:15:48.400 --> 0:15:51.600
<v Speaker 1>how would it work? I'll talk with Bloomberg reporter Alison

0:15:51.680 --> 0:15:57.040
<v Speaker 1>ver Sprilled for the latest. I'm Stacy Marie Ishmael and

0:15:57.120 --> 0:16:00.240
<v Speaker 1>this is Bloomberg Crypto, a daily podcast from bloom Burg

0:16:00.280 --> 0:16:03.240
<v Speaker 1>and I Heart Radio. For more shows from I heart Radio,

0:16:03.400 --> 0:16:06.520
<v Speaker 1>visit the i heart Radio app, Apple Podcasts, or wherever

0:16:06.560 --> 0:16:10.160
<v Speaker 1>you get your podcasts. Email your questions, comments or suggestions

0:16:10.160 --> 0:16:13.040
<v Speaker 1>for the show to Crypto at Bloomberg dot Net and

0:16:13.080 --> 0:16:16.880
<v Speaker 1>you'll find us on Twitter at Crypto. The producer and

0:16:17.000 --> 0:16:20.520
<v Speaker 1>editor of this episode is Vicky Vergalina. Associate producer is

0:16:20.560 --> 0:16:24.320
<v Speaker 1>Ty Butler. Desta wonder At is our engineer. Original music

0:16:24.400 --> 0:16:27.880
<v Speaker 1>by Leo Sidron. Bloomberg's head of Podcasts is Francesca Levi