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Speaker 1: Were you here for thanksgoing?

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Speaker 2: I was working.

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Speaker 1: You're working naturally giving all of this markets man Viz.

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Speaker 1: Bloomberg News Executive editor Stacy Marie Schmaiel worked through the

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Speaker 1: holiday last week. A lot of her work in the

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Speaker 1: newsroom involves tracking one of the most volatile markets around, crypto,

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Speaker 1: and the last few weeks have been a roller coaster.

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Speaker 3: The market is eyeing quite nervously. The lows that we

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Speaker 3: saw over the past couple of weeks pretty pronounced selov

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Speaker 3: in bitcoin yesterday, today's stabilizing.

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Speaker 1: Back in October, bitcoin reached a record high Bitcoin more

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Speaker 1: than doubling in value over the past year.

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Speaker 3: Look at this, you're to date of thirty percent, hitting

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Speaker 3: a fresh record.

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Speaker 1: But just a few weeks later, its price had plunged,

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Speaker 1: taking out over one trillion dollars in crypto assets along

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Speaker 1: with it. On Tuesday, it rallied. It was back above

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Speaker 1: ninety thousand dollars. That's left investors and analysts wondering what

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Speaker 1: to make of these dramatic swings.

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Speaker 4: I don't think the pain is over for crypto.

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Speaker 2: There's a selloff, there's always the risk that it accelerates

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Speaker 2: beyond what a reasonable person might expect. Or when there

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Speaker 2: is a sudden recovery and people are like, why is

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Speaker 2: that happening? Nobody really has a good answer.

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Speaker 1: So was the latest crypto selloff a wake up call

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Speaker 1: or just par for the chorus for a volatile market?

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Speaker 1: I'm David Gera and this is the big take from

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Speaker 1: Bloomberg News today. On the show What just happened to

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Speaker 1: the Crypto Market and What can it tell us about

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Speaker 1: Crypto's future? Stacy Marie Ishmael has been tracking the crypto

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Speaker 1: market swings closely. Bitcoin is down almost thirty percent from

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Speaker 1: its October high, but she says it's important to put

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Speaker 1: that in context.

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Speaker 2: We're only really down like ten percent on the year, which,

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Speaker 2: depending on how you look at the chart, some people

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Speaker 2: are either having a very good year or a very

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Speaker 2: bad one, and that really, to me is part of

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Speaker 2: the story of this asset class. Right. Cryptocurrencies are volatile

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Speaker 2: by nature. They have long been perceived as a risk asset.

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Speaker 2: They trade in ways that have been described as chaotic.

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Speaker 2: They don't have kind of necessarily predictable patterns because people

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Speaker 2: aren't able to do like corporate cash flow analysis or

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Speaker 2: whatever those things are. So when there's a sell off,

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Speaker 2: there's always the risk that it accelerates beyond what a

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Speaker 2: reasonable person might expect, or when there is a sudden

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Speaker 2: recovery and people are like, why is that happening? Nobody

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Speaker 2: really has a good answer, And that's pretty much what's

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Speaker 2: been going on for the past two months.

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Speaker 1: You and your team have been watching all of this unfold.

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Speaker 1: It ruined your Thanksgiving holiday. At this point, what can

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Speaker 1: you tell us about why it happened, Why we saw

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Speaker 1: bitcoin and other cryptocurrencies fall from those sides of just

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Speaker 1: a couple weeks ago.

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Speaker 2: I can tell you what people are telling us. Okay,

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Speaker 2: so the first thing is going back to this idea

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Speaker 2: of bitcoin being a risk asset. What are the things

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Speaker 2: that are supportive of risk assets? A low interest rate environment,

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Speaker 2: you know, the idea that policies will be accommodating to

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Speaker 2: people having lots of money to spend on things. And

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Speaker 2: the very second you have a concern that, say, the

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Speaker 2: Fed is not going to lower interest rates as quickly

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Speaker 2: as people hope they might, then folks start to get

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Speaker 2: a little bit more conservative about their positioning. A couple

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Speaker 2: of days ago, there was some comments from the Bank

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Speaker 2: of Japan suggesting that interest rates there might be increasing,

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Speaker 2: and that had some spillover effect. There's also people who

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Speaker 2: associate crypto in general, will bitcoin very specifically with the

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Speaker 2: fortunes of the Trump White House and its policies are

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Speaker 2: on crypto because Trump was when he was inaugurated, you know,

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Speaker 2: some of his very first executive orders were perceived as

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Speaker 2: being very supportive of cryptocurrencies.

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Speaker 4: I pledged that we would bring back American liberty and

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Speaker 4: leadership and make the United States to crypto capital of

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Speaker 4: the world, and that's what we've done.

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Speaker 2: There was this idea of establishing a bitcoin reserve. If

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Speaker 2: you talk to various people in the industry, they might

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Speaker 2: say things like, well, you know, legislation hasn't moved as

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Speaker 2: quickly as we would like, we're not seeing as many

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Speaker 2: changes as we want, or yes, we got those things,

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Speaker 2: but you know what else is going to come? Like,

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Speaker 2: is there anything else that they're going to do? So

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Speaker 2: all in all, it's been an environment in which there

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Speaker 2: are not a lot of reasons for people to buy

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Speaker 2: with high conviction, but there have been a lot of

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Speaker 2: reasons for people to sell.

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Speaker 1: You having lived through downturns in the crypto market before,

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Speaker 1: does it feel familiar? Does it feel different. We've know

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Speaker 1: that crypto winter from a couple of years back. Does

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Speaker 1: it feel eaerily similar?

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Speaker 2: The former CEO of failed crypto firm FTX, Sam Bankman Freed,

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Speaker 2: has been arrested in the Bahamas at the request of

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Speaker 2: the US government. Just how long is.

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Speaker 3: Winter going to ask and how cold is it going

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Speaker 3: to get? Like how much lower is Bigfooring going to go?

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Speaker 2: Well, nobody has filed for bankruptcy, which is a big,

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Speaker 2: big difference from that time around. And we haven't seen

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Speaker 2: anybody arrested in the Bahamas and you know, taken taken

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Speaker 2: into custody. So there are very many elements of this

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Speaker 2: that are different. And in addition to a much more

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Speaker 2: shall we say, explicitly constructive policy environment, we also have

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Speaker 2: the fact that the market structure is different. You know,

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Speaker 2: cryptoetfs didn't exist in twenty twenty two, and to an

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Speaker 2: extent they have provided almost an institutional floor because so

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Speaker 2: many retail investors are interested in these things, they have

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Speaker 2: them in their four oh one case. We have on

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Speaker 2: the other side this idea of the digital Ashet Treasury Company,

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Speaker 2: which kind of existed with micro strategy now called Strategy,

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Speaker 2: but now you have various other companies that used to

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Speaker 2: be like e commerce firms saying we want to pivot

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Speaker 2: and hold bitcoin as our balance sheet strategy. So I

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Speaker 2: think it's hard to draw an immediate like for like

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Speaker 2: comparison to what was happening in twenty twenty two. But

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Speaker 2: I would say until we start to see like real,

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Speaker 2: this feeling of panic selling as opposed to this kind

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Speaker 2: of steady burn, then we're still in a very different environment.

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Speaker 1: Let me stick with those ETFs because it sort of

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Speaker 1: lent a level of legitimacy to this market that didn't

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Speaker 1: have before. Beyond that sort of how has it shaped

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Speaker 1: the way that this market reacts? Having what about a

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Speaker 1: dozen of these ETFs, now more than that.

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Speaker 2: Forgive me so many more. Our analysts and Bloomberg Intelligence

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Speaker 2: have a very long spreadsheets of all the different out

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Speaker 2: style ETFs. Yeah, there's Bitcoin, but there's also like doge

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Speaker 2: coin and ripple and other things.

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Speaker 1: Do they buffet the market?

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Speaker 2: Not all of them are very popular. So you know,

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Speaker 2: the biggest one by far, which does have a very

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Speaker 2: significant number of assets is ibit, which is from black Rock.

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Speaker 2: But one of the things that ETFs have done is

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Speaker 2: introduced a wider range of people to the idea of

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Speaker 2: having exposure to crypto as an asset class, which is

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Speaker 2: just a different way of thinking about size. Right. Yeah,

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Speaker 2: you still have to be the kind of person who

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Speaker 2: thinks about what you want near four oh one k

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Speaker 2: and haves like some contact with the financial advisor generally speaking.

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Speaker 2: But you know, if you didn't want to have to

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Speaker 2: figure out like how to set up a crypotal wallet,

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Speaker 2: how to buy bitcoin directly, what's the stable coin? Now

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Speaker 2: you can just be like, oh, this can diversify my portfolio.

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Speaker 2: And that was really seen by the industry as a

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Speaker 2: huge step in that legitimacy that you're describing, on.

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Speaker 1: That pathway to normalization or legitimization. A Vanguard, second largest

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Speaker 1: asset manager, this week announcing that its customers can trade

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Speaker 1: ATF's mutual funds that crypto heavy on their platform. How

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Speaker 1: big a moment is is that in the evolution of

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Speaker 1: this asset class.

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Speaker 2: From a narrative perspective, enormous from a didn't have any

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Speaker 2: major consequences in the crypto price like kind of I

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Speaker 2: will say that, you know, they have been the last

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Speaker 2: really big holdout. A lot of people have been just

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Speaker 2: waiting for the moment in which they would say yes.

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Speaker 2: And of course this comes after, you know, they have

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Speaker 2: a new CEO who comes from the world of crypto

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Speaker 2: ETFs was like part of the team responsible for driving

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Speaker 2: forward ibit that we just mentioned. So I think that

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Speaker 2: was kind of one of those things where the news

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Speaker 2: was not so much that it happened, just that it

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Speaker 2: happened this week because it was one of those things

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Speaker 2: that people were very much expecting.

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Speaker 1: This is a risk asset class. Risky asset class, I

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Speaker 1: should say as well, and we've seen what nineteen billion

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Speaker 1: dollars of leverage bets wiped out over the course of

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Speaker 1: this sell off. Explain exactly what that means instic terms.

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Speaker 2: Imagine you could, you know, take a position on something,

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Speaker 2: but you do it by borrowing money. So you're like, oh,

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Speaker 2: I want to make a five dollar bet, so I'm

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Speaker 2: going to borrow five dollars, So you don't actually have

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Speaker 2: five dollars. You've borrowed five dollars, and if that bet

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Speaker 2: goes in your favor like fantastic, like now you have

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Speaker 2: like five, possibly ten dollars depending on how it structured.

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Speaker 2: If that bet moves against you, now you owe money

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Speaker 2: that you didn't have any first place. Don't come for me.

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Speaker 2: That's a wild verse implications of how these things work.

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Speaker 2: But generally, it's this idea of people putting up capital

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Speaker 2: that is, in fact more than they can necessarily comfortably

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Speaker 2: repay because they were expecting prices to move in a

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Speaker 2: particular direction and actually those prices moved against them.

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Speaker 1: What does that tell you about this market? That there

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Speaker 1: is a there has been a hearty appetite for risk

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Speaker 1: of confidence that it's yeah.

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Speaker 2: I mean, it just goes back to that idea of

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Speaker 2: risk assets, right, And for a good chunk of this year,

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Speaker 2: it was like the narrative was like, you know, Crypto's back,

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Speaker 2: Bitcoin is back. The entire environment is supportive of it.

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Speaker 2: So the shift in October where we saw what we

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Speaker 2: thought was like initially kind of a flash crash because

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Speaker 2: it was very sudden and very aggressive, but the market

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Speaker 2: hasn't been able to come back from that, and that

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Speaker 2: is I think indicative that there might be some repricing

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Speaker 2: towards a lower level. Right, So if the bulls we're

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Speaker 2: expecting we enter twenty twenty six at anywhere from one

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Speaker 2: fifty to one million, depending on how ambitious you are

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Speaker 2: we're you know, we're kind of closer to ninety right now,

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Speaker 2: and that may be where we end December.

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Speaker 1: I think there's a tendency to focus on Bitcoin, the

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Speaker 1: og cryptoer the biggest. Has the selloff been across the

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Speaker 1: board all cryptocurrencies wrapped up in it, or if there

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Speaker 1: be any standouts that haven't been affected.

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Speaker 2: I wouldn't say anybody hasn't been affected. I will say

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Speaker 2: some things have been hit harder than others. So at

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Speaker 2: the very very risky, highly speculative end of the market,

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Speaker 2: you have like the meme coins, right, which are in

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Speaker 2: the name it's like based around memes. But there have

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Speaker 2: been two very high profile meme coin launches this year,

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Speaker 2: one named after the President and one named after the

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Speaker 2: first Lady, and those have been hammered to an extent

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Speaker 2: that is in a lot of ways like more intense

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Speaker 2: than we've seen in other corners of the market. And

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Speaker 2: we've also seen kind of a similar effect on other

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Speaker 2: Trump family related crypto properties. Right, We've been tracking the

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Speaker 2: decline in the shares of American Bitcoin, which is a

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Speaker 2: cryptomning currency associated with Trump, and so it does feel

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Speaker 2: like there is something different that is happening with the

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Speaker 2: kind of the Trump family crypto portfolio as opposed to

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Speaker 2: the wider market.

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Speaker 1: Coming up, how Trump and his family continue to influence

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Speaker 1: the crypto market, and Stacy, Marie and I dig into

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Speaker 1: what the president's attempts to prop up the market could

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Speaker 1: mean for its future. It seems like a lot of

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Speaker 1: the enthusiasm or wider embrace of crypto was brought about

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Speaker 1: by the Trumps and the Trump administration taking a different

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Speaker 1: tack toward digital assets.

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Speaker 2: A fair way to.

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Speaker 4: Say that with today's signing, the future of crypto and

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Speaker 4: the crypto industry, the US dollar working together because they

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Speaker 4: really are hand in hand, is going to be stronger

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Speaker 4: and bigger and better than ever before.

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Speaker 1: Can you just explain sort of what that's meant in

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Speaker 1: real terms? So we see regulators that are acting maybe

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Speaker 1: as muscularly as they did during the Biden administration, but

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Speaker 1: beyond that sort of what has that change in approach

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Speaker 1: meant for the industry as a whole.

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Speaker 2: I think from the industry perspective, sometimes people will say

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Speaker 2: it was like, oh, act first, apologize after they're just acting,

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Speaker 2: because there isn't even a need to apologize, right, There

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Speaker 2: isn't a fear or a concern that someone will launch something,

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Speaker 2: do something, try something, and they'll immediately be confronted with

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Speaker 2: like a Wells notice or you know, a regulator being

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Speaker 2: like just a reminder about prudential regulation. So it certainly

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Speaker 2: has liberated I would think the approach of the industry

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Speaker 2: in terms of how quickly they want to launch products,

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Speaker 2: how risky those products can be. Like one of the

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Speaker 2: big things that we certainly sow in twenty twenty five is,

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Speaker 2: you know, if you're a crypto company or a fintech

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Speaker 2: with any kind of crypto releasing thing, you're like, I

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Speaker 2: want to ipo, I want to raise money, I want

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Speaker 2: to get engaged in M and A. Because it's like

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Speaker 2: this perception was like we have a window. We don't

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Speaker 2: know how long this window will be open for, but

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Speaker 2: we're going to take full advantage.

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Speaker 1: Can you describe the contours of the galaxy of digital

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Speaker 1: asset involvement this president and his family have. So you

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Speaker 1: mentioned American bitcoin, this bitcoin mining company, the Trump mean coin,

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Speaker 1: the Milennia meme coin. How expansive is it.

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Speaker 2: It's very wide ranging, and I think that it's also

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Speaker 2: not necessarily visible all the time because like Trump media

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Speaker 2: for instance, which runs the Truth social platform, the messaging

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Speaker 2: platform choice of the President has arrangements with crypto companies,

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Speaker 2: famously one called crypto dot com to investigate the launches

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Speaker 2: of like crypto related ETFs. They're doing things like potentially

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Speaker 2: getting into prediction markets, which is different from crypto proper,

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Speaker 2: but I would say ideologically similar in that it's another

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Speaker 2: mechanism through which people can take different approaches or entry

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Speaker 2: points into the financial system. Then you know, you have

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Speaker 2: the World Liberty Financial of which Trump the President is

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Speaker 2: listed as like the sort of emeritus member of it,

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Speaker 2: but which is largely run day to day by other

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Speaker 2: parts of the family, which is working on a stable coin.

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Speaker 2: They have described themselves as you know, a DeFi, a

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Speaker 2: decentralized financial platform. So I would say, lots of pies,

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Speaker 2: lots of fingers in those pies. Not necessarily a lot

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Speaker 2: of specific economic activity that we can yet point to,

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Speaker 2: but we're certainly paying attention.

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Speaker 1: How big a deal is the Trump family as kind

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Speaker 1: of a hype machine in this space. So I saw

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Speaker 1: that Eric Trump was interviewed by Bloomberg News in November

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Speaker 1: commenting on this dip, and he said, what a great

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Speaker 1: buying opportunity.

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Speaker 3: With crypto comes volatility. Volatility is our friend. Volatility is

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Speaker 3: something that should be harnessed, right, and so I think

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Speaker 3: bitcoin is going to continue to massively overperform the markets.

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Speaker 1: Does that make a difference when you have a family

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Speaker 1: that is so heavily invested in this space saying something

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Speaker 1: like that, is it encouraging others? Is it effectively encouraging

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Speaker 1: other people?

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Speaker 2: To the presidents in the family and everyone associated has

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Speaker 2: been very explicit repeatedly that there are no conflicts of

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Speaker 2: interest to be found anywhere in any of this involvement.

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Speaker 2: At the same time, they have been very high profile,

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Speaker 2: very visible, very public, explicit exponents of the values of

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Speaker 2: from parts of this ecosystem, whether from their own personal

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Speaker 2: investments or you know, one or more of the Trump

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Speaker 2: sons effectively attending like every cryptoconference of note to talk

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Speaker 2: up digital assets. And then you have other high profile

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Speaker 2: members of the administration, including Howard Lutnik, who you know,

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Speaker 2: his family firm Cantor Fitzgerald very famously was kind of

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Speaker 2: I think responsible for the turning point in the perception

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Speaker 2: of Tether, the world's largest table coin company, because you know,

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Speaker 2: Lutnick came out a couple of years ago and said, like,

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Speaker 2: tether has the money that it says it has, and

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Speaker 2: that just changed the game entirely for Tether, and they're

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Speaker 2: now seeking to raise quite a lot of money at

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Speaker 2: a very you know, spacexy open Ai type valuation. So

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Speaker 2: I wouldn't say that there is no effect. It's just

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Speaker 2: not always that the effect is like as direct as

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Speaker 2: folks might make it out to be.

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Speaker 1: How do you see these assets in kind of the

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Speaker 1: broader sweep? I remember when there was a lot of

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Speaker 1: talk about it being an inflation hedge. Now we've kind

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Speaker 1: of seen it move in concert with risk your tech stocks.

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Speaker 1: What can digital assets tell us about the overall market?

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Speaker 2: I will once again tell you what people say. Certainly

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Speaker 2: there's an idea that it is an inflation hedge. You know,

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Speaker 2: one bitcoin is one bitcoin is the phrase that sometimes use.

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Speaker 2: I do think because bitcoin trades twenty four to seven

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Speaker 2: and crypto trades twenty four seven, and it's a market

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Speaker 2: that's open when other markets are closed, it sometimes acts

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Speaker 2: like a future's market, right that if something happens in

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Speaker 2: the world that people are either bearish or bullish on,

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Speaker 2: we will often see a move in crypto that doesn't

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Speaker 2: feel like cryptospecific, but more like, oh, this is open

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Speaker 2: and I can trade it. I'm going to do that

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Speaker 2: and then other markets catch up. That is absolutely a

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Speaker 2: phenomenon that is well established, it's been happening for a while.

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Speaker 2: There's real things that are going on there. But I

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Speaker 2: do think a third is just this general like risk

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Speaker 2: and sentiment barometer, because it's the kind of thing for

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Speaker 2: a lot of people where it's not a core part

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Speaker 2: of your portfolio. Yes, there are hedge funds that are

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Speaker 2: entirely dedicated to digital assets. You can definitely find a

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Speaker 2: financial advisor who's like, you're ready, five sure, put all

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Speaker 2: your money in bitcoin. That is a thing that exists,

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Speaker 2: but for a majority of investment professionals, it's the kind

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Speaker 2: of thing where you're like, this is an interesting place

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Speaker 2: to diversify, and if the rest of your portfolio is

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Speaker 2: underperforming and crypto is doing well, fantastic. But if crypto

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Speaker 2: isn't doing well, you might ask, Okay, well should I

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Speaker 2: put my money in gold or in silver or something

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Speaker 2: else where you might be seeing better and more immediate returns.

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Speaker 1: Uniqueness of this space, this asset classes things can turn around.

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Speaker 2: Pretty quickly tomorrow, it might be right, we're.

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Speaker 1: Seeing Bitcoin climb higher and Cardana and ether. What does

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Speaker 1: history tell us about the way rebounds work with cryptocurrencies?

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Speaker 1: What makes them stay? What makes it not just an

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Speaker 1: anomals blip where we see them going up after a

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Speaker 1: huge sell off. What tends to give them staying power?

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Speaker 1: And how do you think about that in the context

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Speaker 1: of this particular sell off.

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Speaker 2: One of the things that I do in the Bloomberg

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Speaker 2: terminal is there's a function that lets you like look

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Speaker 2: at news events versus prices on a chart, and I

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Speaker 2: spend a lot of time staring at that trying to

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Speaker 2: figure out, Okay, like what has been driving in crypto.

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Speaker 2: And it is true that really significant actions that prop

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Speaker 2: up a certain narrative have helped rallies in the past. Right,

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Speaker 2: So you know in July of last year, when you know,

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Speaker 2: Donald Trump goes to a conference for the bitcoin faithful

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Speaker 2: and says like I want to make the United States

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Speaker 2: the bitcoin capital of the world, that absolutely precipitated a

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Speaker 2: run up that you know kind of peaked for a

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Speaker 2: while in January, or you know, going back two years

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Speaker 2: when like bitcoin ETFs were approved, or on the other side,

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Speaker 2: when Sam Backwinfried got arrested and FTX collapsed and we're like, hah,

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Speaker 2: that doesn't seem good. So right now, what's missing is

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Speaker 2: this like single thing? So people are like, oh, is

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Speaker 2: it going to be the vanguard announcement about ETFs? Is

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Speaker 2: it going to be you know, whoever replaces Dero Powers? Yeah,

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Speaker 2: And we just haven't seen a big capitalist and we're

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Speaker 2: sort of running out of days this year for something

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Speaker 2: really big to happen.

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Speaker 1: This is the Big Take from Bloomberg News. I'm David Gerat.

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