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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim

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Speaker 1: Fox along with my co host Lisa A. Bramowitz. Each

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Speaker 1: day we bring you the most important, noteworthy, and useful

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Speaker 1: interviews for you and your money, whether you're at the

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Speaker 1: grocery store or the trading floor. Find the Bloomberg p

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Speaker 1: m L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.

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Speaker 1: A lot of analysts are calling yesterday's market crash a

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Speaker 1: highly technical sell off, so I think it's wonderful day

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Speaker 1: to take a look at the infrastructure of markets. Was

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Speaker 1: this a flash crash and what does that mean about

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Speaker 1: markets going forward? I am very happy to bring in

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Speaker 1: Dennis Debuscher. He is head of portfolio strategy at ever

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Speaker 1: Core I s I and he joins us right now

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Speaker 1: by phone. Dennis, thank you so much for being with us.

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Speaker 1: So did we the witness a flash crash? And what

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Speaker 1: was behind this? I mean people are blaming algorithms. How

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Speaker 1: how valid is that? Yeah, I mean it's tough to

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Speaker 1: identify how valid it is, and we it's difficult to

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Speaker 1: know what a flash crash technically is because it's a

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Speaker 1: terminus defined very loosely. But I would argue as far

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Speaker 1: as the vixus concern and as far as volatility is concerned,

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Speaker 1: it was absolutely a flash crash. If you invert the chart,

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Speaker 1: of course UM and for the markets, UM you had

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Speaker 1: elements of it. So what does that mean? The markets

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Speaker 1: and certainly in a quantitative driven world optimized to certain

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Speaker 1: certain conditions, and the conditions that existed was um in

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Speaker 1: which led to a massive short volatility Trait either implicitly

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Speaker 1: or explicitly, was that there was going to be no

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Speaker 1: inflation forever, and they were by extension, no economic volatility

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Speaker 1: and no market volatility. And it now it seems like

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Speaker 1: you're pricing in some level of inflation, some higher level

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Speaker 1: of rates, and that started to kick in this unwind

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Speaker 1: of this ultra levered I would argue short volatility bet

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Speaker 1: and given that we went to a high of fifty

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Speaker 1: overnight on the vix from nine just not too long

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Speaker 1: and long ago, and it really accelerated course today, I

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Speaker 1: would say absolutely it's a flash crash. I would say.

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Speaker 1: The one additional point here to make, and I don't

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Speaker 1: think people realize, is algos make electronic trading, and electronic

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Speaker 1: trading dominates all trading right now, and so orders the

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Speaker 1: depth of them are not as what they used to

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Speaker 1: be when used to have classic market making UM people

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Speaker 1: and bank that balance. She's very very levered in ability

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Speaker 1: to absorb losses. So you have very little depth. And

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Speaker 1: if you have millions of orders going in one direction

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Speaker 1: and you re optimize to higher volatility, it can set

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Speaker 1: off these type of crash flash crash events. Dennis, we

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Speaker 1: want to just step back for a second, because as

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Speaker 1: you just describe, you know, a lot of the trading,

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Speaker 1: the day to day price is set by machines and algorithms,

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Speaker 1: whereas investors may actually buy companies that they think are

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Speaker 1: doing well or are going to actually do better um speak.

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Speaker 1: If you cannabat capital spending expenditures when it comes to

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Speaker 1: companies and the tax overhaul plan and how that may

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Speaker 1: in affect sort of build on the improvements that we

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Speaker 1: saw in the stock market at least last year, and

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Speaker 1: that we're going to see some spending when companies get

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Speaker 1: their hands on all that cash not just going to

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Speaker 1: be all shared by backs. Yeah, I mean, first, thanks

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Speaker 1: for talking about fundamentals, so um yes, I mean one

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Speaker 1: of the things we've noticed and you can see it

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Speaker 1: in the FEDS regional diffusion indices of capex plants of

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Speaker 1: all accelerated meaningfully. It appears that post tax reform, atly

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Speaker 1: from the confidence readings you're getting from businesses, that capital

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Speaker 1: capital spending is going to increase meaningfully, which adds um.

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Speaker 1: You know another level, if you will, to GDP growth

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Speaker 1: that's been entirely consumption driven for a long period of time,

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Speaker 1: so companies will be spending more um that is going

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Speaker 1: to create much higher relative to expectations levels of GDP growth,

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Speaker 1: not only this year but next year. And so that's

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Speaker 1: why you have US GDP growth trending up from two

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Speaker 1: and a half to say maybe even three, and global

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Speaker 1: GDP because it's not just a US phenomenon somewhere in

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Speaker 1: the three to three nine range. That's a very solid backdrop.

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Speaker 1: And if you have some inflation with that and not

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Speaker 1: a lot, that's a really good at backdrop for asset prices. Historically,

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Speaker 1: we also have central bank policy globally that isn't going

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Speaker 1: to be pushing hard against improving economic growth. I either

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Speaker 1: not going to be trying to lift the unemployment rate

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Speaker 1: to stop inflation. So all of that says that and

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Speaker 1: that's probably why credit spreads haven't blown out, which everybody

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Speaker 1: has talked about. That's why economic fundamentals are likely to

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Speaker 1: stay relatively solid. That a lot of what's happening now

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Speaker 1: is technical. The fundamentals are still there, and the market

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Speaker 1: is still biased higher over time and so and it's

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Speaker 1: very good obviously for earnings on a go forward basis

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Speaker 1: when you're looking at one consentus for this year and

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Speaker 1: one so I guess and Dennis, the question is can

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Speaker 1: investors just completely ignore technical sell offs or should they

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Speaker 1: pay attention, especially given the fact that some estimate that

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Speaker 1: there's two trillion dollars tied to short volatility strategies right

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Speaker 1: now that really didn't move necessarily. I would never say

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Speaker 1: I want to just ignore it, but I would sell you.

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Speaker 1: The ability to profit from it is extremely difficult relative

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Speaker 1: to history, when we used to have different measures of

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Speaker 1: sentiment that you could say, like just talking to people

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Speaker 1: in the street, etcetera, that they might be um um

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Speaker 1: overly concerned about a market decline. I've been looking at

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Speaker 1: my server all morning, and I can't tell if it's

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Speaker 1: HAPPI or sad. I can't tell if it's capitulated. So

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Speaker 1: I think you have to ride out the volatility if

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Speaker 1: it's technical driven, are you really trying to assess the

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Speaker 1: state of mind if your computer saying I'm just saying,

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Speaker 1: in this new world, you know, trying to pick these

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Speaker 1: bottoms and volatility has become to become very difficult. And

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Speaker 1: to answer your question, more or less, you do have

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Speaker 1: to as long as you believe in the fundamental longer

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Speaker 1: term that our supporter of that, you do have to

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Speaker 1: ignore a lot of this technical stuff and just have

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Speaker 1: a you know, a tougher stomach stomach for it. Dennis

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Speaker 1: does this as the head of portfolio strategy. It does

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Speaker 1: this U sort of bring out that conversation with investors

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Speaker 1: and clients. They say they can stomach the risk, but

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Speaker 1: when the day like yesterday it takes place, it turns

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Speaker 1: out that maybe they can't. I mean, yes, I mean

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Speaker 1: in talking with UH, talking with the investors, that's obviously

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Speaker 1: a concern. But I would also say, don't forget where

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Speaker 1: we came from. We're just flat on on the end

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Speaker 1: of season. I mean, you're up you know, two over

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Speaker 1: twofold sense of financial crisis. You've had extremely UH favorable

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Speaker 1: returns in the market. So I don't think there's any

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Speaker 1: sense of panic at all from individual investors. Yes, there's

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Speaker 1: concerns because on all over the TV is this low

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Speaker 1: volatility unwind. But we're not out of place or anywhere

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Speaker 1: close to a place where anybody thinks about Paine. Market

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Speaker 1: returns have just been too strong. Thanks very much for

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Speaker 1: being with us. Dennis to Busher, he is the head

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Speaker 1: of portfolio Strategy for ever Core I s I, helping

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Speaker 1: to manage more than eight billion dollars in a customer assets.

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Speaker 1: Before we say anything or do anything with the bond market,

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Speaker 1: we always check in with Ira Jersey. He is our

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Speaker 1: chief US interest rate strategist for Bloomberg Intelligence. And I

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Speaker 1: got a little bit of a sell off at the

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Speaker 1: long end buying at the short end. Give us an

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Speaker 1: update on what's going on in the treasury market. Yeah,

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Speaker 1: So in the treasury market today, it's it's actually selling

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Speaker 1: just about everywhere. Um. Yesterday was you know, pretty um,

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Speaker 1: pretty correlated with the move in the VIX. If you

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Speaker 1: if you look, we had one of the biggest uh, well,

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Speaker 1: we certainly had the biggest rally of of treasury yields

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Speaker 1: in the last couple of a couple of months where

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Speaker 1: you had a fourteen basis point rally and tenure yields.

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Speaker 1: And the last time you saw that was around and uh,

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Speaker 1: you know other little jitters and markets and um, you

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Speaker 1: know it was it was really huge moves and and

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Speaker 1: the volume that went through was astounding. In fact, you

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Speaker 1: don't normally see volume at three o'clock, like the volume

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Speaker 1: after you see payrolls reports or FED or FED statements

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Speaker 1: and uh, and that's exactly what you had yesterday, was

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Speaker 1: just this massive volume going through lots of people. Well

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Speaker 1: it's hard to tell if there were lots of people buying,

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Speaker 1: but certainly the volume of buying was was quite astounding. Well,

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Speaker 1: I want to home in on that because I'm wondering,

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Speaker 1: do we have a sense of who's behind this. Is

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Speaker 1: this real money accounts with people actually trying to liquidate

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Speaker 1: some of their treasury holdings, or is this algorithmic trading

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Speaker 1: that is correlated with stocks or whatever else. Uh, and

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Speaker 1: is sort of moving on its own affair and we'll

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Speaker 1: get at some point rectified as people reassess inflation and

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Speaker 1: growth expectations. Yes, that's a good question. And you know,

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Speaker 1: I talked to a lot of people yesterday and we

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Speaker 1: were all kind of scratching our heads and saying like

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Speaker 1: this can't be humans. It's a little bit too fast

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Speaker 1: for that. So UM, it probably was some kind of

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Speaker 1: either algorithm or um. You know, people were talking about

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Speaker 1: potentially risk parity strategies, rebalancing or or or something like that.

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Speaker 1: But to your point, and that's a great point, is

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Speaker 1: that today's move is kind of counter to that. So

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Speaker 1: we put out a note this morning um on on

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Speaker 1: b I rates on your terminal and basically we discussed

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Speaker 1: that Look, when you get these moves of you know, ten, fifteen,

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Speaker 1: twenty basis points in ten year treasuries or across the market,

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Speaker 1: you tend then to see a lower volatility day that follows,

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Speaker 1: and usually some counter trend to that, and that's exactly

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Speaker 1: what we're getting today, um and and in fact, over

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Speaker 1: the last seven years, you tend to get these big

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Speaker 1: bouts of volatility, and they might be driven by algorithmic

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Speaker 1: or or electronic trading and UM and they tend to

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Speaker 1: be very short lived. And then you wind up with

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Speaker 1: people saying, okay, is this justified based on the fundamentals,

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Speaker 1: as anything really changed? Um And once you realize that, no,

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Speaker 1: things haven't really changed. From an economic standpoint, then you

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Speaker 1: can get back to kind of the the old trends

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Speaker 1: you were on. I just want to understand a little

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Speaker 1: bit more about old trends and new trends, because earlier

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Speaker 1: in the day we were speaking with Alberto Gallo of Algebras,

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Speaker 1: and he I thought it was very, very impression when

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Speaker 1: he said, people have been buying stocks for yield and

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Speaker 1: bonds for capital gains. Is that about to change? Well,

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Speaker 1: I think that that actually has changed. I mean, I

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Speaker 1: think that changed probably two years ago when we hit

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Speaker 1: the you know, one fifty yield on on tenure treasuries.

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Speaker 1: Because once you start to move back from that, it's

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Speaker 1: hard to see how you get significant returns or at

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Speaker 1: least returns much higher than the coupon at this point

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Speaker 1: on a lot of the treasury uh UM a lot

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Speaker 1: of the treasury market, whereas in equities now you you

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Speaker 1: have yields that are somewhat higher than than the dividend

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Speaker 1: payouts of equities UM. And at the same time, I

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Speaker 1: mean you have to look at things like Gina Martin

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Speaker 1: att Are Equity Strategists, has done some great work on

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Speaker 1: on things like earnings and the fundamentals are ultimately going

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Speaker 1: to be the driver of of long term prospects for

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Speaker 1: for equities. So within an environment like we have now

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Speaker 1: we have slightly higher inflation, where you have growth prospects

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Speaker 1: that seem okay at least in the in the near term. Um,

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Speaker 1: you know, the question is is there going to be

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Speaker 1: you know, pressure on margins and things like that, and

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Speaker 1: and that can wind up meaning that you have an

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Speaker 1: equity market that is based a lot more on fundamentals

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Speaker 1: than necessarily people buying it for income like you've had

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Speaker 1: over the past couple of years. Is this particular market

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Speaker 1: are we already seeing jitters and uh some kind of

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Speaker 1: pricing in of the debt ceiling and the possible risk

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Speaker 1: there or can we expect a whole new hiccup as

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Speaker 1: people start to wake up to that risk. Yeah. So,

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Speaker 1: so the depth ceiling is going to show up in

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Speaker 1: the in the T bill market, and there are the

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Speaker 1: t buil market keeps on pricing. Uh, a problem with

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Speaker 1: the depth sailing in and out and for various dates.

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Speaker 1: Because the problem with the death ceiling with analyzing where

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Speaker 1: the deaths when the death sailing is going to get

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Speaker 1: hit this time of year, is that starting about now?

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Speaker 1: You get a lot of tax refunds that come in,

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Speaker 1: and the timing of when those come in winds up

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Speaker 1: being very important because the way that the Treasury Department

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Speaker 1: pays out um the tax refunds is by issuing treasury bills.

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Speaker 1: And so we're at this point now where if you

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Speaker 1: wind up getting a whole lot of people come in

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Speaker 1: in the next two weeks, there it's possible that even

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Speaker 1: in the first week of March we wind up with

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Speaker 1: with the debt the death ceiling being a problem. Whereas

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Speaker 1: if those are a little bit slower than they were

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Speaker 1: stay last year, then you can wind up actually towards

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Speaker 1: the end of March. So yeah, the market is already

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Speaker 1: pricing for that. The market is pricing in and out

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Speaker 1: different March t bills um as being the problem. For

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Speaker 1: for the death ceiling. We we still think it's somewhere

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Speaker 1: in the second half of March. That's what our model shows,

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Speaker 1: but again there's a lot of uncertainty around the inputs

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Speaker 1: to that model. And uh and and that's the behavior

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Speaker 1: of the taxpayer. Thank you so much, iro A Jersey.

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Speaker 1: A really important time to be watching the treasury market

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Speaker 1: right now. Thank you so much for being with us

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Speaker 1: Jersey is an interstate strategist for Bloomberg Intelligence, coming to

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Speaker 1: us from our BI headquarters in Princeton, New Jersey. The

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Speaker 1: real story of this week's turmoil really is volatility exchange

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Speaker 1: traded notes and just generally the volatility and short volatility.

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Speaker 1: Trained here to talk about that is Sarah Ponzack Cross,

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Speaker 1: asked reporter with Bloomberg News. Uh, Sarah, thank you so

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Speaker 1: much for being with us. So we did get news

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Speaker 1: today that Credit Suites is liquidating, Uh, their short volatility

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Speaker 1: exchange traded note. Not tiny, this had what three billion

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Speaker 1: dollars at one point in it. Who are the investors

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Speaker 1: behind us? And walk us through what happened here? So

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Speaker 1: the investors behind this, it's definitely a combination. So Credit

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Speaker 1: Suite was the biggest holder of x i V. They

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Speaker 1: actually had about thirty two of the holding. So the

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Speaker 1: remaining sixty eight we can't know for sure. It can

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Speaker 1: be some institutional, but it is a lot of retail

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Speaker 1: investors who don't understand exactly what the risks of these

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Speaker 1: products are. I mean, I remember a couple of months back,

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Speaker 1: we had stories coming about out of workers at Walmart

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Speaker 1: who were making money off of buying these products trading

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Speaker 1: the VIX because they just thought that it was easy money,

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Speaker 1: because they thought this tranquility would stay calm forever. But

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Speaker 1: they didn't understand what would actually happen if the VIX

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Speaker 1: spikes like we saw it did happen yesterday. So my

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Speaker 1: question is were there advisors that were peddling these products

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Speaker 1: to them in a way that they shouldn't have been.

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Speaker 1: We saw that black Rock came out today demanding more regulation,

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Speaker 1: especially given the fact that exchange traded notes are often

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Speaker 1: conflated with exchange traded funds. Uh so what are people

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Speaker 1: saying about that exactly? So I think this is kind

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Speaker 1: of a watershed moment for the e t F industry

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Speaker 1: because we haven't had to deal like with something like

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Speaker 1: this yet. And what happened is, like he said, Larry,

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Speaker 1: thing came out black because come out they're urging more regulation,

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Speaker 1: saying that the people create these funds need to actually

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Speaker 1: say and let people know what these risks actually entail

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Speaker 1: and kind of separate themselves from the E t F

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Speaker 1: industry because they're not vanilla e T s. And I

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Speaker 1: think someone like a black Rock is really nervous that

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Speaker 1: people are going to start generalizing, and this is going

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Speaker 1: to affect their products. People are going to be scared

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Speaker 1: of buying their plane Vanilla A T S, buying the

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Speaker 1: S and P five hundred because of what has happened

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Speaker 1: with the vix. Now one was an E T N

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Speaker 1: x I V, but then one of them was actually

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Speaker 1: an E T F. It still operates in a similar way,

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Speaker 1: but still they're basically saying that there's just been more

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Speaker 1: regulations when you're not dealing with the plane Vanilla E

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Speaker 1: T F explaining what the actual risks at hand are. Well,

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Speaker 1: he is not playing vanilla when it comes to anything

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Speaker 1: related to the markets, and that is Corey Johnson, and

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Speaker 1: I want to bring him in. He is our anchor

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Speaker 1: and editor at large for Bloomberg TV and Radio and

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Speaker 1: co host with Carol Master Bloomberg Markets PM and also

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Speaker 1: if you look back into his history his career history,

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Speaker 1: he was also a portfolio manager previously at Kingsford Capital

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Speaker 1: Management as well as Canal Capital and Corey, what do

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Speaker 1: you make of this, Uh, this conversation about volatility and

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Speaker 1: volatility linked exchange traded funds. So I think what's really

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Speaker 1: amazing here is this is an unprecedented This is a

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Speaker 1: true black Swan event written into the structure of this

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Speaker 1: x I V product. The CT this exchange traded note

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Speaker 1: was a really interesting clause, and it said that it's

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Speaker 1: the underlying security spiked more than it could trigger essentially

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Speaker 1: a liquidation, and that it never happened before ever in

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Speaker 1: the history of the VIX. So even those people who

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Speaker 1: were sophisticated and may have actually gone to the trouble

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Speaker 1: of reading the perspectives and understanding what they were getting

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Speaker 1: into might have looked at this and said, yeah, but

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Speaker 1: when is is going to happen? And this really does

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Speaker 1: get to the old saw. You know, it's different this time.

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Speaker 1: It was different. This time, We've never ever seen volatility

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Speaker 1: spike more than in a given day. Um. It was

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Speaker 1: also interesting to see this happen really in the late

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Speaker 1: moments of the trade yesterday, when it was clear that

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Speaker 1: this thing was going to become um uh, you know,

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Speaker 1: this whole this whole instrument is going to disappear, and uh,

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Speaker 1: the underlong one of the underlowinged instruments suddenly traded down

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Speaker 1: in the last half an hour of trading. Worth noting

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Speaker 1: also that we know some of the robot advisors and

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Speaker 1: Vanguard were unable to deal with clients at that point.

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Speaker 1: They weren't picking up the phones, their systems weren't accepting trades.

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Speaker 1: So any investors were in this through that giant brokerage

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Speaker 1: House of Anger for example, couldn't get out. Um and uh,

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Speaker 1: it's it's a it's a real problem. Uh. And you know,

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Speaker 1: we talked with the value of this thing. We don't

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Speaker 1: know who the holders are, but if you just add

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Speaker 1: up the number of holdings that we do know about,

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Speaker 1: there were about college fifteen million shares out, which means

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Speaker 1: that the at at the ninety nine dollar value, we've

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Speaker 1: had about a one point five billion dollar valuation completely

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Speaker 1: wiped out overnight. And as you mentioned, that threshold that

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Speaker 1: was reached yesterday increase for the VIX. Yeah, and certainly

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Speaker 1: it is being liquidated and you have to wonder about

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Speaker 1: what kind of build on effect it has. Being liquidated

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Speaker 1: at a week time leaves even less value. Corey Johnson,

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Speaker 1: thank you so much for joining us Bloomberg Markets co anchor,

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Speaker 1: and also Sarah Ponzack Cross as reporter for Bloomberg News.

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Speaker 1: Thank you both very much. The head of the Bank

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Speaker 1: for International Settlements, he has really taken bitcoin to task.

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Speaker 1: He describes it as quote a combination of a bubble

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Speaker 1: a Ponzi scheme, and he says due to the energy

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Speaker 1: consumption required for mining it, he calls it an environmental disaster.

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Speaker 1: This was quote from Augustin Carston's he is the general

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Speaker 1: manager of the Bank of International Settlements. Here to give

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Speaker 1: us his view is Ryan Radloff. He is the chief

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Speaker 1: executive of coin Shares UK, helping to manage about a

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Speaker 1: billion dollars in crypto assets. Joining us from London, Ryan,

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Speaker 1: just give you the opportunity to respond to Mr Carston's

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Speaker 1: what would you say to him? Hi, thank you, thanks

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Speaker 1: for having me. I mean, bitcoin is obviously a controversial

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Speaker 1: topic and it's certainly not a ponzi um that we've

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Speaker 1: been in a state of mania about it over the

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Speaker 1: last twelve months. But really what bitcoin is is an

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Speaker 1: index measure of the dissatisfaction of the current legacy financial system,

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Speaker 1: and it's no surprise that individuals that are sitting on

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Speaker 1: the other side of that in the legacy system would

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Speaker 1: aim to take shots at it. But if you look

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Speaker 1: at what bitcoin is doing across the world from a

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Speaker 1: humanitarian standpoint, um, it is enabling people to be financially

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Speaker 1: free for the first time without having an account with

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Speaker 1: any bank or anywhere else. So it's serving just as

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Speaker 1: much good um as any any one of those negative

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Speaker 1: points that he mentioned. All Right, well, I've got to say,

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Speaker 1: financial freedom isn't what I think of when I look

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Speaker 1: at the star at the price of bitcoin over the

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Speaker 1: past couple of weeks. Uh, it certainly is not financial

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Speaker 1: freedom for the people who bought it at eighteen dollars,

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Speaker 1: since it's fallen below six th latest reading in a second.

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Speaker 1: But I'm just wondering, I mean, do you really think

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Speaker 1: that the people who are in bitcoin right now are

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Speaker 1: people protesting the structure of the financial system actually right now,

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Speaker 1: just to clarify, it's a little over seven thousand dollars

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Speaker 1: um but or or rather is this people who are

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Speaker 1: bored of the markets that have gotten very tranquil, not

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Speaker 1: this week withstanding, and are trying to make a big

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Speaker 1: buck by going in here. Well, I think it's both

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Speaker 1: without question. I mean, the early days of bitcoin, where

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Speaker 1: you had technologist and early adopters, there's even this libertarian

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Speaker 1: movement to it, as I mentioned. You know, in the

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Speaker 1: last few months we've seen the users come into into

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Speaker 1: crypto high your moment for a speculation purposes, and they're

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Speaker 1: getting a hard lesson right now. UM, a lesson that

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Speaker 1: many of us have learned over the last four years

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Speaker 1: being in this market that this is going to correct

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Speaker 1: every quarter. Um, it's it's going to be volatile. Hold

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Speaker 1: on for the ride, um and you know, but it's

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Speaker 1: it's going to be increasing and user adoption, network value

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Speaker 1: over a long term scale. So we look at it

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Speaker 1: much more on a long term horizon. Okay, so let's

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Speaker 1: let's look at a long term horizon. Where are we

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Speaker 1: headed with this? Well, there's a few new fundamentals to

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Speaker 1: look at. Um. You know what what we see is

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Speaker 1: bitcoin and you've heard this before, displacing the concept of

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Speaker 1: of a digital gold and creating this new market for

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Speaker 1: decentralized digital money, and the things that people should start

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Speaker 1: paying attention to our our new things like network stability,

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Speaker 1: node count, and new fundamentals of this asset class, not

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Speaker 1: necessarily what technical analysis of a price is going to

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Speaker 1: start doing. Um. So I think that as the market

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Speaker 1: becomes more educated, you'll start seeing and hearing things like network,

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Speaker 1: node count, and distribution. And that's the things that I

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Speaker 1: think users and people need to start paying attention when

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Speaker 1: they're analyzing these new asset classes like Bitcoin. What is

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Speaker 1: network node count? Yeah so so at coin shares, what

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Speaker 1: our research team will look at is the number of

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Speaker 1: nodes that are operating and running the Bitcoin software. And

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Speaker 1: the more nodes there are, the more decentralized and strong

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Speaker 1: the network becomes. And those are important fundamentals and factors.

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Speaker 1: And if you look at the last six months, Bitcoin's

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Speaker 1: network unquestionably has gotten stronger through the second half of

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Speaker 1: the year by growing and node count um and yes,

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Speaker 1: we're seeing a big risk off correction throughout the market.

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Speaker 1: It's not just Bitcoin in the first half of this year,

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Speaker 1: but if you look at the underlying fundamentals bitcoin, in

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Speaker 1: terms of network strength, Bitcoin has never been stronger um so,

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Speaker 1: so we were very excited about that. This is node count,

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Speaker 1: I beg your part an N O, D E node count,

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Speaker 1: that's right, it's an important that's an important factor to watch.

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Speaker 1: Almost think of as a new fundamental um and instead

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Speaker 1: of looking at price to earnings ratios or or margins

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Speaker 1: of a company, this is an example of what you

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Speaker 1: should be looking at in terms of analyzing a new

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Speaker 1: network based asset. Class like bitcoin or etherium or ripple

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Speaker 1: or one of these others. You know today, UH, I

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Speaker 1: know that the SEC chair is testifying in front of

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Speaker 1: Congress about cryptocurrency regulation. We've heard UH from South Korean regulators.

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Speaker 1: Japanese regulators are looking into uh, particularly one of the

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00:23:33,400 --> 00:23:36,280
Speaker 1: exchanges there. I'm just wondering. I mean, you talk about

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00:23:36,280 --> 00:23:40,520
Speaker 1: financial independence and independence from the sort of traditional financial system,

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00:23:40,560 --> 00:23:42,840
Speaker 1: but you need to be connected to it in some

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00:23:42,960 --> 00:23:46,680
Speaker 1: way since, as we see, futures now of bitcoin are

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00:23:46,720 --> 00:23:49,360
Speaker 1: trading and a lot of these contracts are securities and

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00:23:49,440 --> 00:23:52,600
Speaker 1: being treated as such by the SEC. So what's the

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00:23:52,720 --> 00:23:57,159
Speaker 1: sort of comfortable intersection here of government oversight and regulation

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00:23:57,760 --> 00:24:03,200
Speaker 1: UH and freedom or independence from traditional financial worlds. Yeah,

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00:24:03,200 --> 00:24:04,960
Speaker 1: it's it's this is a good question. It's it's a

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00:24:04,960 --> 00:24:07,280
Speaker 1: hot topic right now. And I personally I think that

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00:24:07,359 --> 00:24:12,840
Speaker 1: we need more regulations specifically around the consumer protection UM

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00:24:13,400 --> 00:24:15,840
Speaker 1: elements of what we're seeing in the I c O market. UM.

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00:24:15,920 --> 00:24:20,199
Speaker 1: We need a clear cut UM you know, report that

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00:24:20,400 --> 00:24:23,240
Speaker 1: I think comes from the crypto community almost like a

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00:24:23,280 --> 00:24:25,840
Speaker 1: code of ethos of how things are going to be

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00:24:25,880 --> 00:24:28,919
Speaker 1: done UM, and that needs to be liaison and passed,

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00:24:29,119 --> 00:24:32,639
Speaker 1: passed through regulators from the legacy world. So it's going

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00:24:32,680 --> 00:24:35,040
Speaker 1: to be very difficult for the regulators to come up

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00:24:35,080 --> 00:24:38,840
Speaker 1: with this code of conduct if you will, on their own. UM. So,

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00:24:38,880 --> 00:24:41,040
Speaker 1: I think this needs to come from the crypto community.

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00:24:41,440 --> 00:24:45,760
Speaker 1: It needs to be brought to the regulators um and

454
00:24:45,760 --> 00:24:48,159
Speaker 1: and worked on that jointly. But it's gonna be very difficult.

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00:24:48,160 --> 00:24:50,479
Speaker 1: And part of the reason why is because you have

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00:24:50,520 --> 00:24:52,960
Speaker 1: three elements at play here. You've got, first the fact

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00:24:53,000 --> 00:24:55,879
Speaker 1: that we're dealing with monetary assets that don't require a

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00:24:56,000 --> 00:24:58,960
Speaker 1: name to be moved around. The second is that they're global,

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00:24:59,160 --> 00:25:01,879
Speaker 1: so they don't fall under new jurisdiction. And the third

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00:25:02,080 --> 00:25:05,040
Speaker 1: is that they can actually move other assets like dollars

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00:25:05,080 --> 00:25:08,600
Speaker 1: over these over these networks. So it creates a very

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00:25:08,600 --> 00:25:10,879
Speaker 1: difficult challenge for regulators. So that's why I think it

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00:25:10,880 --> 00:25:13,480
Speaker 1: needs to come from the crypto community and then pass

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00:25:13,520 --> 00:25:15,679
Speaker 1: through and worked with the regulators to come to some

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00:25:15,760 --> 00:25:20,440
Speaker 1: code of ethos or conduct. Who who or what entity

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00:25:20,560 --> 00:25:25,080
Speaker 1: from the crypto community would be the most likely leader. Well,

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00:25:25,119 --> 00:25:26,760
Speaker 1: I think you know, if you think of it's even

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00:25:26,760 --> 00:25:30,119
Speaker 1: of where the intersection it needs to happen, Where the

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00:25:30,160 --> 00:25:34,320
Speaker 1: intersection of FIAT too, crypto occurs UM and that is

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00:25:34,359 --> 00:25:37,240
Speaker 1: on the that's those are the exchanges, so the coin

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00:25:37,280 --> 00:25:41,320
Speaker 1: basis of the world. UM. Those are the individuals that

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00:25:41,359 --> 00:25:44,880
Speaker 1: are facilitating the process of the movement of legacy money

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00:25:45,000 --> 00:25:50,480
Speaker 1: like FIAT money into blockchain based monetary assets or cryptocurrencies. UM.

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00:25:50,520 --> 00:25:53,639
Speaker 1: So exchanges groups like us, We're gonna be working with

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00:25:53,680 --> 00:25:55,639
Speaker 1: a group out of the UK UM to work with

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00:25:55,680 --> 00:25:59,000
Speaker 1: the UK government on this. UM. We're gonna help spearhead that.

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00:25:59,080 --> 00:26:01,119
Speaker 1: And then there's other companies like coin base that are

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00:26:01,119 --> 00:26:04,120
Speaker 1: taking leadership roles as well. UM and and that that's

479
00:26:04,200 --> 00:26:06,359
Speaker 1: Those are the types of companies and the profile of

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00:26:06,359 --> 00:26:08,600
Speaker 1: where it needs to come from. Ryan Radlof, thank you

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00:26:08,640 --> 00:26:11,560
Speaker 1: so much for joining us. Really interesting and it would

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00:26:11,560 --> 00:26:13,680
Speaker 1: be great to keep in touch with you as this

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00:26:13,680 --> 00:26:16,920
Speaker 1: story unfolds. Ryan Radlof is chief executive officer of coin

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00:26:17,000 --> 00:26:21,000
Speaker 1: Shares UK, which has a billion dollars in crypto assets

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00:26:21,000 --> 00:26:27,960
Speaker 1: and it's based in London. Thanks for listening to the

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00:26:28,000 --> 00:26:31,120
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen

487
00:26:31,119 --> 00:26:35,280
Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform

488
00:26:35,359 --> 00:26:39,240
Speaker 1: you prefer. I'm pim Fox, I'm on Twitter at pim Fox,

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00:26:39,560 --> 00:26:43,080
Speaker 1: I'm on Twitter at Lisa Abramo. It's one before the podcast.

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00:26:43,119 --> 00:26:45,720
Speaker 1: You can always catch us worldwide on Bloomberg Radio