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

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

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Speaker 1: It's Tuesday, July twelve. Depending on who you ask, cryptos

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Speaker 1: volatility is either a bug or a feature. Wild, unexpected

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Speaker 1: or aggressive price swings make this an asset class that

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Speaker 1: is ill suited to anyone less experienced or less comfortable

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Speaker 1: at managing risk. It's clear that these swings can be challenging,

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Speaker 1: but is there a world in which some people perceive

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Speaker 1: them as a benefit, and if so, what's that upside?

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Speaker 1: Today I'm joined by Bloomberg Opinion columnist Leonel Laurent to

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Speaker 1: discuss whether there's any value to cryptos volatility. Leonard, thank

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Speaker 1: you so much for joining us. Where are you joining

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Speaker 1: us from today? I'm joining you from Paris, which is yeah,

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Speaker 1: trying to be a crypto hub along with many other cities.

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Speaker 1: Lots of cities might currently be rethinking their desire to

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Speaker 1: be crypto hubs, given given the state of the markets.

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Speaker 1: You know, one of the things our colleague and your

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Speaker 1: direct colleague in Bloomberg Opinion, Tyler Cohen has written about

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Speaker 1: is this idea that if you can't think of any

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Speaker 1: other good reasons for crypto to exist, the fact that

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Speaker 1: it's so volatile is potentially interesting. You have written a

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Speaker 1: lot about many different elements of crypto, often with an

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Speaker 1: extremely skeptical perspective. I'd love to hear what you think

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Speaker 1: about the idea of volatility as usability. Yeah. I think

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Speaker 1: I think it's pretty accurate to say that if you're

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Speaker 1: promoting an asset as being volatile, that means it's failed

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Speaker 1: on a lot of other fronts. It's not usual that

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Speaker 1: we spend a time saying I love the price of

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Speaker 1: electricity when it's volatile. I love it when I go

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Speaker 1: to the store and my purchasing power is very volatile. Therefore,

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Speaker 1: I don't know if I'm going to pay a lot

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Speaker 1: or pay a little to my groceries zero point zero

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Speaker 1: one bitcoin please. So I think the point here is

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Speaker 1: to say that volatility is great for some types of actors,

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Speaker 1: and it's kind of interesting because I think those are

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Speaker 1: the actors that do like crypto today. Financial traders who

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Speaker 1: know how to model risk and volatility, speculators who I guess,

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Speaker 1: okay with the prospect of stomach churning falls if it

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Speaker 1: means that in the future they can still dream of

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Speaker 1: a hundred percent or even more. And even journalists and

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Speaker 1: people chit chatting and intellectuals like this kind of volatile

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Speaker 1: thing because it means they can think about all the

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Speaker 1: different ways in which crypto can develop in future. But

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Speaker 1: the bottom line is, if it's volatile, then it's failed

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Speaker 1: at being I think it's failed at being a medium

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Speaker 1: of payment and medium of exchange, because that's as we

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Speaker 1: see it around us in these times of energy volatility.

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Speaker 1: Most people do not want their method of payment to

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Speaker 1: be volatile. Most people can't even afford to have their

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Speaker 1: say evings or their investments and in something this volatile.

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Speaker 1: So I think that even if you can argue that volatility,

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Speaker 1: you can say, you can even say I think a

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Speaker 1: lot of people do. The volunteers coming down in crypto.

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Speaker 1: I think recently it's shot back up, and I think

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Speaker 1: it shows you that this is not for the masses. Yet,

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Speaker 1: it's not for the faint hearted. It's for a certain

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Speaker 1: type of investor. To that point, Malton Dumire's the chief

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Speaker 1: strategy officer at coin Shares, previously had this to say

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Speaker 1: on Bloomberg Markets and again, what we need to remember

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Speaker 1: is in crypto, volatility is the price of the opportunity.

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Speaker 1: We are going to see dramatic swings and corrections. That

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Speaker 1: is part of being allocated to the asset class. I

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Speaker 1: want to focus on something you said about folks who

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Speaker 1: had perceived crypto potentially being a store of value or

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Speaker 1: a mechanism for payment or a medium of exchange. This

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Speaker 1: isn't something you seem particularly sold on as a prospect. Well, no,

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Speaker 1: I mean it's I think let's focus on bitcoin, because

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Speaker 1: I think there's many flavors of crypto, but Bitcoin is

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Speaker 1: the fascinating story to me because I mean I've been

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Speaker 1: following it for almost a decade now, and the narratives

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Speaker 1: have always changed. In the beginning, it was supposed to

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Speaker 1: be proof that you could have a payment system outside

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Speaker 1: of the banking system. Then it was discovered that past

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Speaker 1: a certain point there were all sorts of inefficiencies and

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Speaker 1: stresses in the system that meant it couldn't scale properly.

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Speaker 1: And then it became sold as digital gold and the

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Speaker 1: sort of scarcity value of these twenty one million bitcoin

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Speaker 1: and you would never go beyond that, and we we

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Speaker 1: see what happens Basically, when you do have a fixed supply,

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Speaker 1: it's a bit like a like a commodity. It all

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Speaker 1: becomes about demand selling bitcoin, getting more people involved, getting

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Speaker 1: new money coming in, and also on top of the

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Speaker 1: new money, having to pay the electricity cost to mind it.

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Speaker 1: These are all reasons why bitcoin is what it is today,

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Speaker 1: which is it still exists and it's still here. You

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Speaker 1: could always point to that and say that's victory. But

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Speaker 1: I don't think you could point out what's happening and say,

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Speaker 1: we we know what this is, we know what this

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Speaker 1: is for, we know how it works. It works as

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Speaker 1: a supposedly the stable store of value because it isn't

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Speaker 1: a store of value. And now the final narrative to

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Speaker 1: fall away is the inflation hedge. Inflation is back in

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Speaker 1: a big way and bitcoin is through the floor. So

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Speaker 1: another narrative that's been knocked down. One thing that you've noted,

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Speaker 1: you know again to use your word about narratives, is

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Speaker 1: this idea of crypto fomo that had affected not all

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Speaker 1: of Wall streets. Certainly some of them have still violently

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Speaker 1: anti crypto, but at least some of them. And the

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Speaker 1: fact that and you tweeted this, and I said you

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Speaker 1: should make this a column. But the people on Wall

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Speaker 1: Street who seemed to be continuing to make money on

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Speaker 1: crypto are the ones who are making distressed bets, right

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Speaker 1: so there bankruptcy advisory or you know, they're collecting fees

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Speaker 1: on different types of trades. Do you think that even

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Speaker 1: Wall Street, which is home to lots of people who

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Speaker 1: understand risk, is finding that that crypto fomo should have

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Speaker 1: been crypto like joy of missing out instead? That's a

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Speaker 1: good question. I think it's it's it's slightly different. I

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Speaker 1: guess at firm level versus individual bank or a trader level.

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Speaker 1: I think institutionally, we have seen a lot of pressure

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Speaker 1: on banks and institutions to to dip their toes. It's

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Speaker 1: resulted in a in a lot of different things. As

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Speaker 1: you point out JP Morgan, investment banks have been lending

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Speaker 1: to institutions that are in crypto. They've not really touched

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Speaker 1: the cryptocurrency themselves, but made money on the ecosystem around it. Basically,

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Speaker 1: I think that for anyone to point at what's happening

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Speaker 1: today and say, Okay, this system is surviving and there

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Speaker 1: are individuals and institutions out there to backstop it, you

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Speaker 1: would have to see a lot more than what's happening today,

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Speaker 1: which is basically some big shot crypto billionaires who run

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Speaker 1: exchanges like sand bankman Freed sort of throwing a few

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Speaker 1: pennies and distressed platforms and hoping to pick up the crumbs.

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Speaker 1: So fd X signing agreement with block by today. The

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Speaker 1: deal includes an option to purchase the crypto lender for

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Speaker 1: as much as two hundred and forty million dollars. Sam

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Speaker 1: Bank and Freed, co founder of fd X, I think

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Speaker 1: you would need an actual Wall Street institution that to

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Speaker 1: come in and say we are making a meaningful acquisition

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Speaker 1: or a meaningful merger here for it to look like

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Speaker 1: this space has a future today within a regulated entity.

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Speaker 1: I think what's happening now shows you that we are

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Speaker 1: a fair way off, even if there has been a

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Speaker 1: bit of I guess unhealthy pomo from some institutions. It's

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Speaker 1: interesting that you say that about you know, e many

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Speaker 1: We we are in such a distressed environment that that's

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Speaker 1: absolutely something that folks are not just expecting but actively

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Speaker 1: talking up right, Like various crypto companies have come out

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Speaker 1: and said we have a responsibility to ensure what's the

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Speaker 1: phrase healthy consolidation in the industry. UM, the CEO of

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Speaker 1: Finance and the folks at Nexto have both said that,

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Speaker 1: you know, they want they want to be there for

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Speaker 1: the people, for the people who need them. You mentioned

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Speaker 1: Sam Bank Man Freed and FTX attempting to sort of

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Speaker 1: ride to the rescue, as it were. But to your point,

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Speaker 1: it doesn't look as if anyone on Wall Street has

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Speaker 1: yet owned anyone operating at a value that is attractive

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Speaker 1: enough to make that risk worth their while. What do

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Speaker 1: you think about the opposite where there's various kinds of

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Speaker 1: speculation that a crypto native firm could make, you know,

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Speaker 1: a tradify a traditional finance acquisition. People got very excited

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Speaker 1: when Sam bankmun Freed disclosed that he had acquired a

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Speaker 1: stake in robin Hood, for instance. Yes, and that that

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Speaker 1: kind of makes me have a different vision of the

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Speaker 1: future of of what he might try and attempt, because

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Speaker 1: I can totally see a universe where he comes out

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Speaker 1: as the as the winner in this situation by creating

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Speaker 1: essentially a kind of great big casino in the sky,

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Speaker 1: a sort of virtual seven marketplace where you can trade

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Speaker 1: stocks and crypto and everything. It's like all of this

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Speaker 1: stuff that the meme stock staff and crypto that's where

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Speaker 1: you go. He's sort of clean house, so that that

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Speaker 1: might be his plan. I don't know today if if

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Speaker 1: that's really possible, If this is this is the question,

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Speaker 1: if crypto keeps falling, If if the coin keeps falling,

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Speaker 1: I don't see how these exchanges today, whether it's ft

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Speaker 1: X or Finance, I just don't see even if they're

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Speaker 1: making a lot of actual dollars out of this, I

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Speaker 1: just don't see how they can they can withstand that.

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Speaker 1: We'll be right back with more of Leonel Laurent's take

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Speaker 1: on the volatility of crypto and its implications for the

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Speaker 1: current market. In another one of your columns, us explicitly

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Speaker 1: used the analogy of crypto not being too big to fail,

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Speaker 1: right contra what happened in two thousands and thees and onward,

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Speaker 1: where various governments decided like, actually, it would seem that

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Speaker 1: having our commercial banking system fall into pieces would not

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Speaker 1: be ideal from a consumer perspective. It doesn't seem as

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Speaker 1: if crypto has sort of risen to that level for

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Speaker 1: regulators and governments. Is there anything that you're observing perhaps

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Speaker 1: in Paris perhaps and Europe, perhaps elsewhere. That suggests that

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Speaker 1: regulators are looking more or less positively on what's happening

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Speaker 1: in crypto right now. Again, we have to separate out

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Speaker 1: a few things. I think regulators have always had the

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Speaker 1: same view of suddenly like bitcoin. I think they are

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Speaker 1: as long as you focused on the exchanges and the

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Speaker 1: off ramps from regular currencies. I think they don't mind

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Speaker 1: it and behaving the way it does. I think size

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Speaker 1: not being too big to fail. I think we've obviously

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Speaker 1: seen today there aren't that many connections to the real economy,

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Speaker 1: and when I ask regulators, what if this one shouldn't

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Speaker 1: got a market disappeared tomorrow, they don't seem that fast

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Speaker 1: about about the consequences. I do think that they are

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Speaker 1: far more concerned about stable coins, as the Facebook experiment

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Speaker 1: put them put them on alert. I do think that

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Speaker 1: they are concerned about what happens next. I mean, if

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Speaker 1: if if de fi becomes the hot thing eventually once

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Speaker 1: once again, and if if links increase to the to

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Speaker 1: the real economy, then they are very concerned and sort

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Speaker 1: of watching it that. I would say that today they

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Speaker 1: haven't really changed their minds much. But I think they

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Speaker 1: are going to be looking much closer at all the

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Speaker 1: different offshoots of crypto to make sure it doesn't accome

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Speaker 1: too big to fall. One day, Well, you mentioned stable coins,

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Speaker 1: and you mentioned the Facebook experiment, which is you know

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Speaker 1: back I think it was in two thousand and eighteen

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Speaker 1: was the first time that this news came out that

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Speaker 1: Facebook was looking to develop a crypto that would allow

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Speaker 1: cross border transfers with WhatsApp as as the vehicle um

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Speaker 1: and a lot of people had concerns about that, certainly

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Speaker 1: the moneygrams of the world, who felt their entire business

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Speaker 1: model quick in fear, but also governments who have an

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Speaker 1: interest in making sure that it's relatively difficult to transfer

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Speaker 1: currencies across borders. As it relates to the regulators that

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Speaker 1: you mentioned, a big concern they have with stable coins

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Speaker 1: is that it reintroduces systemic risks in a way that

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Speaker 1: we also saw in the financial crisis, where things that

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Speaker 1: didn't look correlated suddenly become so because they're all exposed

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Speaker 1: to the same thing. Given what you've said about too

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Speaker 1: big to feel, do you think if stable coins were

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Speaker 1: a bigger part of this ecosystem, you would have a

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Speaker 1: different analysis. I think the problem with with stable coins.

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Speaker 1: As I see it is we're getting into bank like

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Speaker 1: activities without bank like regulation. I think that's the problem.

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Speaker 1: And I think that's what I'm seeing a lot in

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Speaker 1: defied too. You have lending going on, you have borrowing

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Speaker 1: going on, you have leverage, you have interest rates, you

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Speaker 1: have the sort of I guess it's like a meme

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Speaker 1: or or a kind of caricature of what banking is,

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Speaker 1: but without none of the oversights or the or the

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Speaker 1: protections that regular banking has to provide. Right the if

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Speaker 1: it looks like a bank, walks like a bank, talks

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Speaker 1: like a bank, should regulated like a bank situated exactly. Yeah,

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Speaker 1: And I think Frankly Later has been behind the curve

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Speaker 1: a lot of this stuff. I mean, I don't know

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Speaker 1: today what regulators think is beyond the pale. Fundamentally, yes,

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Speaker 1: they say they're tough on fraud and scams, But what

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Speaker 1: is the activity that they think would be beyond the

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Speaker 1: pale for a stable coin or or a non bank

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Speaker 1: entity to provide on de fight through crypto, I don't know.

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Speaker 1: I think we need to know what should be genuinely banned,

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Speaker 1: right and and I'm sure there is stuff that should

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Speaker 1: be banned that isn't even though it's sort of parading

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Speaker 1: itself as defile stable coin, and I just feel like

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Speaker 1: it's not clear, so regulators are always kind of running

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Speaker 1: after it, a clarity that many, many people on multiple

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Speaker 1: sides of this equation are all seeking. Well, thank you

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Speaker 1: so much, Leonard for joining us from the Paris studio

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Speaker 1: of of this podcast. Appreciate you taking the time to

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Speaker 1: come on today. Thank you very much. You can find

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Speaker 1: more of Leonell's opinion columns on the Bloomberg Terminal, on

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Speaker 1: Bloomberg dot com and on Twitter. He's Leonel r A

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Speaker 1: laur That's l a u r e n T. On

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Speaker 1: the next episode of Bloomberg Crypto, some investors are still

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Speaker 1: buying the token known as Luna Classic, which has flatline

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Speaker 1: towards zero in the aftermath of the collapse of the

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Speaker 1: Terra USD stable coin. Why are people willing to bet

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Speaker 1: on so called zombie coins? You'll hear from Bloomberg Senior

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Speaker 1: editor Mike Reagan and Bloomberg Reports Mr Lena IGLFA Polo

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Speaker 1: for more on the motivations of these treasure hunters of

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Speaker 1: the token deeps. I'm Stacy, Marie Ishmael and This is

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Speaker 1: Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio.

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Speaker 1: For more shows from I Heart Radio, visit the I

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Speaker 1: Email your questions, comments, or suggestions for the show to

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Speaker 1: Crypto at Bloomberg dot net, and you'll find us on

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Speaker 1: Twitter at Crypto. The supervising producer of this episode is

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Speaker 1: Vicky very Galina. Our producer is Mohammed Farouk, Associate producer

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Speaker 1: by Leo Sedrin m