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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Day baq At podcast. Good morning,

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Speaker 2: It's Tuesday, the second of December. I'm Caroline Hepka in

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Speaker 2: London and.

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Speaker 1: I'm Stephen Caroline Brussels. Coming up today. Crypto's deepening down

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Speaker 1: turn wipes out almost a billion dollars in leveraged bets

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Speaker 1: as retail investors get stung.

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Speaker 2: The EU warns the US against forcing a lopsided peace

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Speaker 2: plan on Ukraine as Steve Whitkoff heads to Moscow.

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Speaker 1: Plus the verdict is in litigation. Finance hits a wall

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Speaker 1: as bets on huge gains falter. We have a special report.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 1: Almost one billion dollars of leverage crypto positions were liquidated

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Speaker 1: during another sharp drop in prices yesterday. Bitcoin slid by

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Speaker 1: as much as eight percent, bring its declines since early

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Speaker 1: October to almost thirty percent, before recovering in early trading today.

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Speaker 1: The volatile moves have hit retail traders particularly hard, as

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Speaker 1: dip bars have failed to materialize. Jalik job and Putro,

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Speaker 1: managing partner at Future Perfect Ventures, says the market is

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Speaker 1: tracking a broader risk of mood.

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Speaker 3: The October sell off the crypto sector was due to

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Speaker 3: the tariff uncertainty around China. We also saw people taking

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Speaker 3: profits when when bitcoin went up to one hundred and

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Speaker 3: twenty six thousand, So in the span of three months

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Speaker 3: or less than three months, we've seen over a thirty

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Speaker 3: percent drop. That being said, I don't see a downward

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Speaker 3: spiral because there are going to be people who want

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Speaker 3: to get access to the asset.

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Speaker 1: Joli Joba Putra speaking there as, traders are now watching

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Speaker 1: eighty thousand dollars as the next key support level for bitcoin. Today,

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Speaker 1: bitcoin is trading up six tens of one percent, just

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Speaker 1: shy of eighty seven thousand dollars.

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Speaker 2: US Envoy Steve Whitkoff is traveling to Moscow today for

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Speaker 2: talks over Russia's war in Ukraine. This as the EU's

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Speaker 2: top diplomat has expressed concern that American attempts to push

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Speaker 2: Ukraine into a lopsided peace plan would only encourage Russia's aggression.

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Speaker 2: Europe is on edge after an initial twenty eight point

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Speaker 2: plan proposed by the US suggested numerous Russia friendly concessions

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Speaker 2: from Kiev. Ukrainian President Vlodomizelinski said updated language in the

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Speaker 2: latest draft deal looks better, but territory remains the most

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Speaker 2: difficult topic. Speaking after a meeting of EU defense ministers

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Speaker 2: in Brussels, Kayakala said putting pressure on the weaker side

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Speaker 2: is not in anyone's interests.

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Speaker 4: Not in the interest of Ukraine, not in the interest

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Speaker 4: of European Union, also not in the interests of the

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Speaker 4: global overall security, because it's the United Nations chapter that

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Speaker 4: says that you can't change for borders by force. If

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Speaker 4: this pays off, we will see this elsewhere all around

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Speaker 4: the world. Then we see that whoever has the power

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Speaker 4: gets to take what they want, which is not good

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Speaker 4: for the majority of the countries in the world.

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Speaker 2: The EU Representative for Foreign Affairs Kaya kalus There she

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Speaker 2: went on to say that the outcome of today's US

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Speaker 2: Russia talks will be quote pivotal.

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Speaker 1: European defense firms are scrambling for a vital component in

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Speaker 1: high tech weapons rare earth minerals, but nimble US rivals

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Speaker 1: are scooping them up more quickly. Some estimates suggest European

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Speaker 1: suppliers could run dry in the coming months. Boombergs Freddie

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Speaker 1: Filstone has more.

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Speaker 5: Sources told Bloomberg that US firms are much better at

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Speaker 5: securing rare earths than their European counterparts. They have a

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Speaker 5: sense of urgency and financial might, and they're more creative

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Speaker 5: in how they navigate Beijing's restrictions on supplies. The EU

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Speaker 5: is planning to commit at least three and a half

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Speaker 5: billion dollars over the next year to help sever its

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Speaker 5: dependence on China's raw materials. The funding would be critical

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Speaker 5: to securing the military equipment Europe so urgently needs. In London,

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Speaker 5: freddie Fulston Bloomberg Radio.

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Speaker 2: Taiwan's foreign minister says the dispute between China and Japan

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Speaker 2: could drag on for a year. That's after Japanese Prime

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Speaker 2: Minister Sanai Takeichi commented on the possible involvement of her

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Speaker 2: country's troops if China were to invade Taiwan. Beijing saw

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Speaker 2: those comments as crossing a red line. Speaking to Blueberg,

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Speaker 2: Taiwan's Linchi R. Lung said his country hopes the two

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Speaker 2: sides can resolve their differences.

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Speaker 6: Japan has already showed it winness because it's in the

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Speaker 6: parliament in a q A session, So let's have some

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Speaker 6: big grounds for Beijing site. Maybe you take a I

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Speaker 6: think maybe a year to stabilize the.

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Speaker 2: Situation, Taiwan's Foreign Minister Lindcha Lung speaking there. Meanwhile, Taiwanese

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Speaker 2: President Li ching To has urged Beijing to act like

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Speaker 2: a responsible major power. The Foreign Ministry in Beijing didn't

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Speaker 2: immediately respond to a request for comment.

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Speaker 1: The UK is set to adopt a more pro business

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Speaker 1: approach to China. In his annual foreign policy speech, the

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Speaker 1: Prime Minister care Starmer said the country's dealings with China

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Speaker 1: will have more consequences for the public than any other

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Speaker 1: global shift. He added that increased collaboration would not come

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Speaker 1: at the cost of safety.

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Speaker 7: Our response will not be driven by fear nor softened

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Speaker 7: by illusion. It will be grounded in strength, clarity and

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Speaker 7: sober realism, in line with our wider international approach, and

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Speaker 7: guided by our conviction that strong, purposeful engagement on the

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Speaker 7: world stage is the best way, the only way in

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Speaker 7: these times to deliver growth and security for the British people.

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Speaker 1: Prime Minister Kare Starmer is seeking to draw a line

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Speaker 1: under a turbulent period for UK China relations. His remarks

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Speaker 1: come ahead of a decision about a controversial new Chinese

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Speaker 1: embassy in London, and a potential visit to the country

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Speaker 1: next year. According to Starmer, professional and financial services, as

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Speaker 1: well as creative and pharmaceutical industries will be key beneficiaries

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Speaker 1: of Chinese opportunities, adding the UK Investment Minister is currently

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Speaker 1: visiting the country.

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Speaker 2: The Chairman of the Office for Budget Responsibility has resigned

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Speaker 2: following the premature publication of analysis of the latest UK budget.

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Speaker 2: Richard Hughes took responsibility for the error after an investigation

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Speaker 2: found the report was leaked due to people entering a

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Speaker 2: predictable Internet address. Former director of the Institute for Fiscal

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Speaker 2: Studies Paul Johnson says Hughes will be missed.

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Speaker 4: It is a shame.

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Speaker 8: He was a public servant of real integrity and while

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Speaker 8: you had the courage as well to stand up to

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Speaker 8: both this government and the last one when they were

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Speaker 8: less less than clear about their communication, shall.

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Speaker 2: We say, Paul Johnson, speaking there, the document's early release

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Speaker 2: marked an unprecedented breach of procedure. Chancellor Rachel Reeves called

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Speaker 2: the mistake deeply disappointing. In a resignation letter published on Monday.

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Speaker 2: Hughes said that he was certain the OBI, the UK's

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Speaker 2: fiscal watchdog, could regain trust quickly despite the failure.

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Speaker 1: And those are your top stories on the markets. The

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Speaker 1: msciosh Pacific Index two times higher this morning, the nickey

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Speaker 1: in Tokyo is flat. The Japanese yen two times weaker

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Speaker 1: against the US dollar at one fifty five seventy one.

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Speaker 1: After a keenly watched auction of government bonds there drew

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Speaker 1: firm demand. European stock futures a tenth higher for eurostocks

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Speaker 1: fifty Wall Street features down by a tenth of one

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Speaker 1: percent this morning.

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Speaker 2: In a moment, we'll bring you more on how that

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Speaker 2: route in crypto markets is stinging retail investors, plus why

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Speaker 2: litigation finance is having a bad year. But another story

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Speaker 2: has caught our writer today. I'm told it's the season

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Speaker 2: of indulgence, Stephen, Oh, Is that why?

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Speaker 3: Yes?

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Speaker 2: Well, perhaps you'd like to indulge in some edible or

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Speaker 2: couffable vices. Bloomberg's Kat O'Dell has this lovely list of

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Speaker 2: the ultimate foody gifts. Maybe I will wrap up that

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Speaker 2: espresso machine. The Breville apparently consistently delivering great coffee gear,

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Speaker 2: and they have a new dual boiler espresso machine that

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Speaker 2: comes recommended three thousand bucks. Though maybe next year Stephen

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Speaker 2: for you.

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Speaker 1: Or perhaps you'd like a fancy toaster. I mean, you

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Speaker 1: know that's the thing that you just think it's gone

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Speaker 1: too far. Now we all need to calm down. So

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Speaker 1: there's a new steam toaster from bell Muda, Japanese brand.

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Speaker 1: It offers quote a salamander mode that works like a grill.

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Speaker 1: That's nearly four hundred dollars and it's called Toaster Pro

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Speaker 1: and I feel like for that they probably could have

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Speaker 1: come up with a slightly more imaginative name. I quite

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Speaker 1: like the bakery scent candle though, that's when I think

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Speaker 1: could appeal as well. And apparently there's a big deal

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Speaker 1: this year about designer bottles for drinks as well. There's

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Speaker 1: a fancy Don Perignon bottle by the Japanese artist Takashi Morikami,

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Speaker 1: and also you know, elaborate tequila bottles. It's not just

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Speaker 1: what's inside that counts. Apparently now the drink needs to

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Speaker 1: look good as well.

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Speaker 3: I love it.

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Speaker 2: We're going to put a link to one of our

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Speaker 2: fantastic Ultimate Foody gift guides in our show notes for you.

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Speaker 1: Well, let's turn back to our top story this morning,

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Speaker 1: that plunge and crypto assets that we've been monitoring over

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Speaker 1: the past number of days. The sell off appears to

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Speaker 1: be taking a breather today, but traders are expecting more

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Speaker 1: downward pressure. Our Markets Live Executive editor Mark Cudmore joins

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Speaker 1: us now for more. Mark. We're used to seeing wild

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Speaker 1: swings and crypto prices, but is this different this time,

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Speaker 1: given the involvement of ETFs and these levered bets we've

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Speaker 1: been talking about.

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Speaker 9: I don't think it really is different. You know, at

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Speaker 9: its core, bitcoin is constructed to have a boom and

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Speaker 9: bus cycle. You know, it's had repeated seventy percent plus corrections,

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Speaker 9: and it's constructed to constantly have more. It can't, by construction,

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Speaker 9: be stable at high prices. That's because you know, people

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Speaker 9: have been convinced kind of in a kind of cult

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Speaker 9: like manner to buy and hold rather than to persist.

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Speaker 9: You know, tenuously that has any functional purpose. It doesn't

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Speaker 9: yield anything. So when it becomes stable at high prices,

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Speaker 9: well then there's incentive for the whales and the people

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Speaker 9: own a lot to kind of cash out of the margin. Remember,

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Speaker 9: it needs always a marginal buyer to get up in

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Speaker 9: value because it doesn't yield anything, doesn't produce any earnings.

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Speaker 9: So as soon as you get some stability, that just

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Speaker 9: engenders the next round of utility volatility in the next collapse,

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Speaker 9: and then it falls low enough the people want to

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Speaker 9: speculate again, and it goes back into the next boom cycle.

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Speaker 9: The only difference is this time is that because you've

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Speaker 9: got more instruments attached to it, you know, it affects

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Speaker 9: more people. But it's like, you know, does it make

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Speaker 9: a big difference if you you know, if people are

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Speaker 9: losing money on one roulette machine in one casino or

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Speaker 9: in five casinos, it's still that, you know, it's just

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Speaker 9: a multiplication effect.

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Speaker 2: Okay, your view interesting and clear. Maybe that's yeah about

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Speaker 2: the difficulties of bitcoin and what it is to invest

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Speaker 2: in it. And I suppose I mean, as you say,

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Speaker 2: the cautionary tales may be piling up right Michael Sailor's

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Speaker 2: Strategy Inc. Which is one of those vehicles that help

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Speaker 2: retail investors get into bitcoin. Does that look like a

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Speaker 2: cautionary tail?

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Speaker 3: Now?

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Speaker 4: Yeah?

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Speaker 9: I think you know, at least one that you can

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Speaker 9: say around Michael Sailor is that you know, he was

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Speaker 9: original in this and kind of led the way, and

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Speaker 9: I think I think strategy has a special status because

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Speaker 9: of that. But the digital asset treasury companies don't make

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Speaker 9: as much sense when it's you know, much easier for

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Speaker 9: investors to get into the crypto exposure in many different

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Speaker 9: ways like the ETFs you mentioned, so you know it's

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Speaker 9: a digital asset treasury company is kind of sem pointless member.

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Speaker 9: You're accumulating an asset that yields nothing. You're basically just

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Speaker 9: ccumulating a loads of lines in a spreadsheet, and so

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Speaker 9: it doesn't really make much sense to have a premium

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Speaker 9: for that. So at least Strategy was the originals, the

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Speaker 9: kind of the first kind of led the way. It's

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Speaker 9: got some status. It's the same way that bitcoin has

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Speaker 9: a special status in the crypto community. But I think

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Speaker 9: you know that that is a worrying story now. I

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Speaker 9: think it's very important they come out the statement yesterday

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Speaker 9: they've got a reserve fund to pay their dividends to

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Speaker 9: the next camera as a year and a half or

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Speaker 9: something that fourteen months is not. But ultimately, you know,

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Speaker 9: they're probably going to have to sell crypto down at

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Speaker 9: some point. I think it's going to really worry people

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Speaker 9: when their stock price falls below their holdings of bitcoin,

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Speaker 9: because that stops them able to raise more cash. And

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Speaker 9: so I think ultimately it's a very flawed model, even

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Speaker 9: if strategy was the original and best of them.

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Speaker 1: Mark talk us through this sort of bigger impact of

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Speaker 1: the bigger picture of what we're watching in crypto as well.

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Speaker 1: Is this a useful proxy for how investors are feeling?

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Speaker 9: I think it's an exceptionally good lead indicator of retail sentiment,

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Speaker 9: which is obviously a very large part of the community.

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Speaker 9: I don't think it's a good guide for institutional sentiment

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Speaker 9: or professional sentiment, but I think it's the you know,

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Speaker 9: the highest beta and most reactive bit of retail. And

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Speaker 9: I think one dynamic, and there's several dynamics to the

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Speaker 9: recent decline, but one dynamic is that, you know, because

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Speaker 9: this k shaped economy in the US well and also globally,

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Speaker 9: we are seeing people get a little bit more squeezed

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Speaker 9: and cost of living and unemployment, which is putting pressure

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Speaker 9: to exasperate things. Now, I don't want to put too

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Speaker 9: much weight in that dynamic that's just feeding to the side,

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Speaker 9: but I do think that's why when we see Crypto

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Speaker 9: get hurt, we see the other favored retail names get hurt.

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Speaker 9: They kind of the momentum stocks, the meme stocks, some

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Speaker 9: of the biggest megacap techniques, even though they're solid companies.

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Speaker 9: So the direct transmission is kind of very minimal, but

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Speaker 9: the guide on retail sentiment is very important. So favored

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Speaker 9: names and positions get hurt.

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Speaker 2: Yeah, it's going to be very interesting to see whether

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Speaker 2: the enthusiasts hold on through another kind of bitcoin route

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Speaker 2: to Bitcoin at the moment trading just below eighty seven

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Speaker 2: thousand dollars, Mark, Thank you so much for being with

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Speaker 2: us as ever our Markets Live Executive editor Mark Cudmore

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Speaker 2: shedding a light onto the bitcoin sell off. Stay with us.

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Speaker 2: More from Bloomberg Daybaqube coming up after.

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Speaker 1: This now, Litigation finances having a bad year after predicting

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Speaker 1: huge growth as recently as January of last year. The

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Speaker 1: industry which channel's money from investors to lawyers chasing corporate malfeasance,

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Speaker 1: it's now finding that hedge funds and other sources of

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Speaker 1: capital are pulling back. Are Managing editor for Sustainable Finance,

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Speaker 1: Tanzanian Broger joins us now for more Tanzanin. Good morning.

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Speaker 1: Let's start with a bit of background on this first.

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Speaker 1: How much has this industry been growing in recent years?

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Speaker 10: Yeah, good morning. So after the past half decade or so,

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Speaker 10: the litigation finance industry has roughly doubled in size to

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Speaker 10: about twenty billion dollars this year, so it's still niche,

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Speaker 10: but it's definitely seen rapid growth. Now behind that growth,

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Speaker 10: you've got a number of factors. One is simply that

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Speaker 10: we've become more litigitus in general, with some sectors just

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Speaker 10: developing faster than the regulations intended to rain them in,

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Speaker 10: so resorting to the courts, resorting to lawsuits has just

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Speaker 10: become more normalized. In such cases are often just deeply

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Speaker 10: complex and just increasingly difficult to predict in terms of

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Speaker 10: how long they might run. So for law firms pursuing litigation,

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Speaker 10: it's become just increasingly attractive as an option to have

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Speaker 10: the suits that they're litigating backed by third party investors

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Speaker 10: rather than having that risk sitting on their own balance sheets.

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Speaker 10: And those are pension funds or wealth funds or hedge

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Speaker 10: funds who then take on those risks against the promise

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Speaker 10: of a really sizable chunk of any winnings.

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Speaker 2: What do you think has changed in investors' attitudes and why?

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Speaker 10: To a large extent, what's changed is the regulatory and

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Speaker 10: legal environment in which litigation finance exists. So in the

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Speaker 10: story we list the main ones that's namely a UK

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Speaker 10: Civil Justice Council recommendation from June of this year that

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Speaker 10: litigation of funders need to be subject to requirements that

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Speaker 10: touch on everything from capital adequacy to greater transparency on

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Speaker 10: the sources of capital that are getting from outside investors.

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Speaker 10: And that then follows on from twenty to twenty three

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Speaker 10: UK Supreme Court ruling that really made a difference to

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Speaker 10: the potential for financial returns for the industry in that

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Speaker 10: profits could no longer be calculated as a percentage of damages,

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Speaker 10: but instead would need to be calculated as a multiple

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Speaker 10: of costs, essentially which a sort of created an anchor

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Speaker 10: that kept the base down. In the US, the industry

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Speaker 10: is now worried that lawmakers are considering reviving legislation that

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Speaker 10: would introduce a significant tax on profits. And then, finally,

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Speaker 10: in the EU, a landmark piece of regulation that lawyers

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Speaker 10: had looked to as recently as twenty twenty four as

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Speaker 10: an avenue toward more litigation. It's called the Corporate Sustainability

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Speaker 10: Due Diligence Directive that's just been dramatically scaled back as

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Speaker 10: part of Europe's efforts to simplify its entire regulatory framework

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Speaker 10: and enhanced competitiveness.

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Speaker 1: So what's the consequence then, of this funding drying up?

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Speaker 10: Cases just generally have been dragging on a lot longer

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Speaker 10: than many funders that expected, and then even when plaintiffs

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Speaker 10: ostensibly win, actually getting the money paid out is in

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Speaker 10: some cases proving very difficult. So for example, there's Burford Capital,

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Speaker 10: which is the world's largest litigation funder. They won a

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Speaker 10: legal fight back in twenty twenty three relating to the

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Speaker 10: fallout of the privatization of Argentine oil company YPF, resulting

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Speaker 10: in a settlement of sixteen billion dollars, but since then

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Speaker 10: they've just faced no end of delays and hurdles and

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Speaker 10: actually getting that money paid out. So yeah, capital allocators

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Speaker 10: are looking at examples like this and deciding in many

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Speaker 10: cases that the risks are just too high.

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Speaker 1: And so what we're.

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Speaker 10: Seeing is that in some cases, rather than allegating funds

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Speaker 10: that litigation funders can preside over with very few strings attached.

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Speaker 10: They're being extremely specific and saying only this specific case

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Speaker 10: is what they're going to back. And then also in

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Speaker 10: some cases we've even seen litigation funders retreating from the

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Speaker 10: business entirely and moving more into sort of advisory functions

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Speaker 10: because the terms are simply to punishing.

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