Speaker 1: Were you here for thanksgoing?
Speaker 2: I was working.
Speaker 1: You're working naturally giving all of this markets man Viz.
Speaker 1: Bloomberg News Executive editor Stacy Marie Schmaiel worked through the
Speaker 1: holiday last week. A lot of her work in the
Speaker 1: newsroom involves tracking one of the most volatile markets around, crypto,
Speaker 1: and the last few weeks have been a roller coaster.
Speaker 3: The market is eyeing quite nervously. The lows that we
Speaker 3: saw over the past couple of weeks pretty pronounced selov
Speaker 3: in bitcoin yesterday, today's stabilizing.
Speaker 1: Back in October, bitcoin reached a record high Bitcoin more
Speaker 1: than doubling in value over the past year.
Speaker 3: Look at this, you're to date of thirty percent, hitting
Speaker 3: a fresh record.
Speaker 1: But just a few weeks later, its price had plunged,
Speaker 1: taking out over one trillion dollars in crypto assets along
Speaker 1: with it. On Tuesday, it rallied. It was back above
Speaker 1: ninety thousand dollars. That's left investors and analysts wondering what
Speaker 1: to make of these dramatic swings.
Speaker 4: I don't think the pain is over for crypto.
Speaker 2: There's a selloff, there's always the risk that it accelerates
Speaker 2: beyond what a reasonable person might expect. Or when there
Speaker 2: is a sudden recovery and people are like, why is
Speaker 2: that happening? Nobody really has a good answer.
Speaker 1: So was the latest crypto selloff a wake up call
Speaker 1: or just par for the chorus for a volatile market?
Speaker 1: I'm David Gera and this is the big take from
Speaker 1: Bloomberg News today. On the show What just happened to
Speaker 1: the Crypto Market and What can it tell us about
Speaker 1: Crypto's future? Stacy Marie Ishmael has been tracking the crypto
Speaker 1: market swings closely. Bitcoin is down almost thirty percent from
Speaker 1: its October high, but she says it's important to put
Speaker 1: that in context.
Speaker 2: We're only really down like ten percent on the year, which,
Speaker 2: depending on how you look at the chart, some people
Speaker 2: are either having a very good year or a very
Speaker 2: bad one, and that really, to me is part of
Speaker 2: the story of this asset class. Right. Cryptocurrencies are volatile
Speaker 2: by nature. They have long been perceived as a risk asset.
Speaker 2: They trade in ways that have been described as chaotic.
Speaker 2: They don't have kind of necessarily predictable patterns because people
Speaker 2: aren't able to do like corporate cash flow analysis or
Speaker 2: whatever those things are. So when there's a sell off,
Speaker 2: there's always the risk that it accelerates beyond what a
Speaker 2: reasonable person might expect, or when there is a sudden
Speaker 2: recovery and people are like, why is that happening? Nobody
Speaker 2: really has a good answer, And that's pretty much what's
Speaker 2: been going on for the past two months.
Speaker 1: You and your team have been watching all of this unfold.
Speaker 1: It ruined your Thanksgiving holiday. At this point, what can
Speaker 1: you tell us about why it happened, Why we saw
Speaker 1: bitcoin and other cryptocurrencies fall from those sides of just
Speaker 1: a couple weeks ago.
Speaker 2: I can tell you what people are telling us. Okay,
Speaker 2: so the first thing is going back to this idea
Speaker 2: of bitcoin being a risk asset. What are the things
Speaker 2: that are supportive of risk assets? A low interest rate environment,
Speaker 2: you know, the idea that policies will be accommodating to
Speaker 2: people having lots of money to spend on things. And
Speaker 2: the very second you have a concern that, say, the
Speaker 2: Fed is not going to lower interest rates as quickly
Speaker 2: as people hope they might, then folks start to get
Speaker 2: a little bit more conservative about their positioning. A couple
Speaker 2: of days ago, there was some comments from the Bank
Speaker 2: of Japan suggesting that interest rates there might be increasing,
Speaker 2: and that had some spillover effect. There's also people who
Speaker 2: associate crypto in general, will bitcoin very specifically with the
Speaker 2: fortunes of the Trump White House and its policies are
Speaker 2: on crypto because Trump was when he was inaugurated, you know,
Speaker 2: some of his very first executive orders were perceived as
Speaker 2: being very supportive of cryptocurrencies.
Speaker 4: I pledged that we would bring back American liberty and
Speaker 4: leadership and make the United States to crypto capital of
Speaker 4: the world, and that's what we've done.
Speaker 2: There was this idea of establishing a bitcoin reserve. If
Speaker 2: you talk to various people in the industry, they might
Speaker 2: say things like, well, you know, legislation hasn't moved as
Speaker 2: quickly as we would like, we're not seeing as many
Speaker 2: changes as we want, or yes, we got those things,
Speaker 2: but you know what else is going to come? Like,
Speaker 2: is there anything else that they're going to do? So
Speaker 2: all in all, it's been an environment in which there
Speaker 2: are not a lot of reasons for people to buy
Speaker 2: with high conviction, but there have been a lot of
Speaker 2: reasons for people to sell.
Speaker 1: You having lived through downturns in the crypto market before,
Speaker 1: does it feel familiar? Does it feel different. We've know
Speaker 1: that crypto winter from a couple of years back. Does
Speaker 1: it feel eaerily similar?
Speaker 2: The former CEO of failed crypto firm FTX, Sam Bankman Freed,
Speaker 2: has been arrested in the Bahamas at the request of
Speaker 2: the US government. Just how long is.
Speaker 3: Winter going to ask and how cold is it going
Speaker 3: to get? Like how much lower is Bigfooring going to go?
Speaker 2: Well, nobody has filed for bankruptcy, which is a big,
Speaker 2: big difference from that time around. And we haven't seen
Speaker 2: anybody arrested in the Bahamas and you know, taken taken
Speaker 2: into custody. So there are very many elements of this
Speaker 2: that are different. And in addition to a much more
Speaker 2: shall we say, explicitly constructive policy environment, we also have
Speaker 2: the fact that the market structure is different. You know,
Speaker 2: cryptoetfs didn't exist in twenty twenty two, and to an
Speaker 2: extent they have provided almost an institutional floor because so
Speaker 2: many retail investors are interested in these things, they have
Speaker 2: them in their four oh one case. We have on
Speaker 2: the other side this idea of the digital Ashet Treasury Company,
Speaker 2: which kind of existed with micro strategy now called Strategy,
Speaker 2: but now you have various other companies that used to
Speaker 2: be like e commerce firms saying we want to pivot
Speaker 2: and hold bitcoin as our balance sheet strategy. So I
Speaker 2: think it's hard to draw an immediate like for like
Speaker 2: comparison to what was happening in twenty twenty two. But
Speaker 2: I would say until we start to see like real,
Speaker 2: this feeling of panic selling as opposed to this kind
Speaker 2: of steady burn, then we're still in a very different environment.
Speaker 1: Let me stick with those ETFs because it sort of
Speaker 1: lent a level of legitimacy to this market that didn't
Speaker 1: have before. Beyond that sort of how has it shaped
Speaker 1: the way that this market reacts? Having what about a
Speaker 1: dozen of these ETFs, now more than that.
Speaker 2: Forgive me so many more. Our analysts and Bloomberg Intelligence
Speaker 2: have a very long spreadsheets of all the different out
Speaker 2: style ETFs. Yeah, there's Bitcoin, but there's also like doge
Speaker 2: coin and ripple and other things.
Speaker 1: Do they buffet the market?
Speaker 2: Not all of them are very popular. So you know,
Speaker 2: the biggest one by far, which does have a very
Speaker 2: significant number of assets is ibit, which is from black Rock.
Speaker 2: But one of the things that ETFs have done is
Speaker 2: introduced a wider range of people to the idea of
Speaker 2: having exposure to crypto as an asset class, which is
Speaker 2: just a different way of thinking about size. Right. Yeah,
Speaker 2: you still have to be the kind of person who
Speaker 2: thinks about what you want near four oh one k
Speaker 2: and haves like some contact with the financial advisor generally speaking.
Speaker 2: But you know, if you didn't want to have to
Speaker 2: figure out like how to set up a crypotal wallet,
Speaker 2: how to buy bitcoin directly, what's the stable coin? Now
Speaker 2: you can just be like, oh, this can diversify my portfolio.
Speaker 2: And that was really seen by the industry as a
Speaker 2: huge step in that legitimacy that you're describing, on.
Speaker 1: That pathway to normalization or legitimization. A Vanguard, second largest
Speaker 1: asset manager, this week announcing that its customers can trade
Speaker 1: ATF's mutual funds that crypto heavy on their platform. How
Speaker 1: big a moment is is that in the evolution of
Speaker 1: this asset class.
Speaker 2: From a narrative perspective, enormous from a didn't have any
Speaker 2: major consequences in the crypto price like kind of I
Speaker 2: will say that, you know, they have been the last
Speaker 2: really big holdout. A lot of people have been just
Speaker 2: waiting for the moment in which they would say yes.
Speaker 2: And of course this comes after, you know, they have
Speaker 2: a new CEO who comes from the world of crypto
Speaker 2: ETFs was like part of the team responsible for driving
Speaker 2: forward ibit that we just mentioned. So I think that
Speaker 2: was kind of one of those things where the news
Speaker 2: was not so much that it happened, just that it
Speaker 2: happened this week because it was one of those things
Speaker 2: that people were very much expecting.
Speaker 1: This is a risk asset class. Risky asset class, I
Speaker 1: should say as well, and we've seen what nineteen billion
Speaker 1: dollars of leverage bets wiped out over the course of
Speaker 1: this sell off. Explain exactly what that means instic terms.
Speaker 2: Imagine you could, you know, take a position on something,
Speaker 2: but you do it by borrowing money. So you're like, oh,
Speaker 2: I want to make a five dollar bet, so I'm
Speaker 2: going to borrow five dollars, So you don't actually have
Speaker 2: five dollars. You've borrowed five dollars, and if that bet
Speaker 2: goes in your favor like fantastic, like now you have
Speaker 2: like five, possibly ten dollars depending on how it structured.
Speaker 2: If that bet moves against you, now you owe money
Speaker 2: that you didn't have any first place. Don't come for me.
Speaker 2: That's a wild verse implications of how these things work.
Speaker 2: But generally, it's this idea of people putting up capital
Speaker 2: that is, in fact more than they can necessarily comfortably
Speaker 2: repay because they were expecting prices to move in a
Speaker 2: particular direction and actually those prices moved against them.
Speaker 1: What does that tell you about this market? That there
Speaker 1: is a there has been a hearty appetite for risk
Speaker 1: of confidence that it's yeah.
Speaker 2: I mean, it just goes back to that idea of
Speaker 2: risk assets, right, And for a good chunk of this year,
Speaker 2: it was like the narrative was like, you know, Crypto's back,
Speaker 2: Bitcoin is back. The entire environment is supportive of it.
Speaker 2: So the shift in October where we saw what we
Speaker 2: thought was like initially kind of a flash crash because
Speaker 2: it was very sudden and very aggressive, but the market
Speaker 2: hasn't been able to come back from that, and that
Speaker 2: is I think indicative that there might be some repricing
Speaker 2: towards a lower level. Right, So if the bulls we're
Speaker 2: expecting we enter twenty twenty six at anywhere from one
Speaker 2: fifty to one million, depending on how ambitious you are
Speaker 2: we're you know, we're kind of closer to ninety right now,
Speaker 2: and that may be where we end December.
Speaker 1: I think there's a tendency to focus on Bitcoin, the
Speaker 1: og cryptoer the biggest. Has the selloff been across the
Speaker 1: board all cryptocurrencies wrapped up in it, or if there
Speaker 1: be any standouts that haven't been affected.
Speaker 2: I wouldn't say anybody hasn't been affected. I will say
Speaker 2: some things have been hit harder than others. So at
Speaker 2: the very very risky, highly speculative end of the market,
Speaker 2: you have like the meme coins, right, which are in
Speaker 2: the name it's like based around memes. But there have
Speaker 2: been two very high profile meme coin launches this year,
Speaker 2: one named after the President and one named after the
Speaker 2: first Lady, and those have been hammered to an extent
Speaker 2: that is in a lot of ways like more intense
Speaker 2: than we've seen in other corners of the market. And
Speaker 2: we've also seen kind of a similar effect on other
Speaker 2: Trump family related crypto properties. Right, We've been tracking the
Speaker 2: decline in the shares of American Bitcoin, which is a
Speaker 2: cryptomning currency associated with Trump, and so it does feel
Speaker 2: like there is something different that is happening with the
Speaker 2: kind of the Trump family crypto portfolio as opposed to
Speaker 2: the wider market.
Speaker 1: Coming up, how Trump and his family continue to influence
Speaker 1: the crypto market, and Stacy, Marie and I dig into
Speaker 1: what the president's attempts to prop up the market could
Speaker 1: mean for its future. It seems like a lot of
Speaker 1: the enthusiasm or wider embrace of crypto was brought about
Speaker 1: by the Trumps and the Trump administration taking a different
Speaker 1: tack toward digital assets.
Speaker 2: A fair way to.
Speaker 4: Say that with today's signing, the future of crypto and
Speaker 4: the crypto industry, the US dollar working together because they
Speaker 4: really are hand in hand, is going to be stronger
Speaker 4: and bigger and better than ever before.
Speaker 1: Can you just explain sort of what that's meant in
Speaker 1: real terms? So we see regulators that are acting maybe
Speaker 1: as muscularly as they did during the Biden administration, but
Speaker 1: beyond that sort of what has that change in approach
Speaker 1: meant for the industry as a whole.
Speaker 2: I think from the industry perspective, sometimes people will say
Speaker 2: it was like, oh, act first, apologize after they're just acting,
Speaker 2: because there isn't even a need to apologize, right, There
Speaker 2: isn't a fear or a concern that someone will launch something,
Speaker 2: do something, try something, and they'll immediately be confronted with
Speaker 2: like a Wells notice or you know, a regulator being
Speaker 2: like just a reminder about prudential regulation. So it certainly
Speaker 2: has liberated I would think the approach of the industry
Speaker 2: in terms of how quickly they want to launch products,
Speaker 2: how risky those products can be. Like one of the
Speaker 2: big things that we certainly sow in twenty twenty five is,
Speaker 2: you know, if you're a crypto company or a fintech
Speaker 2: with any kind of crypto releasing thing, you're like, I
Speaker 2: want to ipo, I want to raise money, I want
Speaker 2: to get engaged in M and A. Because it's like
Speaker 2: this perception was like we have a window. We don't
Speaker 2: know how long this window will be open for, but
Speaker 2: we're going to take full advantage.
Speaker 1: Can you describe the contours of the galaxy of digital
Speaker 1: asset involvement this president and his family have. So you
Speaker 1: mentioned American bitcoin, this bitcoin mining company, the Trump mean coin,
Speaker 1: the Milennia meme coin. How expansive is it.
Speaker 2: It's very wide ranging, and I think that it's also
Speaker 2: not necessarily visible all the time because like Trump media
Speaker 2: for instance, which runs the Truth social platform, the messaging
Speaker 2: platform choice of the President has arrangements with crypto companies,
Speaker 2: famously one called crypto dot com to investigate the launches
Speaker 2: of like crypto related ETFs. They're doing things like potentially
Speaker 2: getting into prediction markets, which is different from crypto proper,
Speaker 2: but I would say ideologically similar in that it's another
Speaker 2: mechanism through which people can take different approaches or entry
Speaker 2: points into the financial system. Then you know, you have
Speaker 2: the World Liberty Financial of which Trump the President is
Speaker 2: listed as like the sort of emeritus member of it,
Speaker 2: but which is largely run day to day by other
Speaker 2: parts of the family, which is working on a stable coin.
Speaker 2: They have described themselves as you know, a DeFi, a
Speaker 2: decentralized financial platform. So I would say, lots of pies,
Speaker 2: lots of fingers in those pies. Not necessarily a lot
Speaker 2: of specific economic activity that we can yet point to,
Speaker 2: but we're certainly paying attention.
Speaker 1: How big a deal is the Trump family as kind
Speaker 1: of a hype machine in this space. So I saw
Speaker 1: that Eric Trump was interviewed by Bloomberg News in November
Speaker 1: commenting on this dip, and he said, what a great
Speaker 1: buying opportunity.
Speaker 3: With crypto comes volatility. Volatility is our friend. Volatility is
Speaker 3: something that should be harnessed, right, and so I think
Speaker 3: bitcoin is going to continue to massively overperform the markets.
Speaker 1: Does that make a difference when you have a family
Speaker 1: that is so heavily invested in this space saying something
Speaker 1: like that, is it encouraging others? Is it effectively encouraging
Speaker 1: other people?
Speaker 2: To the presidents in the family and everyone associated has
Speaker 2: been very explicit repeatedly that there are no conflicts of
Speaker 2: interest to be found anywhere in any of this involvement.
Speaker 2: At the same time, they have been very high profile,
Speaker 2: very visible, very public, explicit exponents of the values of
Speaker 2: from parts of this ecosystem, whether from their own personal
Speaker 2: investments or you know, one or more of the Trump
Speaker 2: sons effectively attending like every cryptoconference of note to talk
Speaker 2: up digital assets. And then you have other high profile
Speaker 2: members of the administration, including Howard Lutnik, who you know,
Speaker 2: his family firm Cantor Fitzgerald very famously was kind of
Speaker 2: I think responsible for the turning point in the perception
Speaker 2: of Tether, the world's largest table coin company, because you know,
Speaker 2: Lutnick came out a couple of years ago and said, like,
Speaker 2: tether has the money that it says it has, and
Speaker 2: that just changed the game entirely for Tether, and they're
Speaker 2: now seeking to raise quite a lot of money at
Speaker 2: a very you know, spacexy open Ai type valuation. So
Speaker 2: I wouldn't say that there is no effect. It's just
Speaker 2: not always that the effect is like as direct as
Speaker 2: folks might make it out to be.
Speaker 1: How do you see these assets in kind of the
Speaker 1: broader sweep? I remember when there was a lot of
Speaker 1: talk about it being an inflation hedge. Now we've kind
Speaker 1: of seen it move in concert with risk your tech stocks.
Speaker 1: What can digital assets tell us about the overall market?
Speaker 2: I will once again tell you what people say. Certainly
Speaker 2: there's an idea that it is an inflation hedge. You know,
Speaker 2: one bitcoin is one bitcoin is the phrase that sometimes use.
Speaker 2: I do think because bitcoin trades twenty four to seven
Speaker 2: and crypto trades twenty four seven, and it's a market
Speaker 2: that's open when other markets are closed, it sometimes acts
Speaker 2: like a future's market, right that if something happens in
Speaker 2: the world that people are either bearish or bullish on,
Speaker 2: we will often see a move in crypto that doesn't
Speaker 2: feel like cryptospecific, but more like, oh, this is open
Speaker 2: and I can trade it. I'm going to do that
Speaker 2: and then other markets catch up. That is absolutely a
Speaker 2: phenomenon that is well established, it's been happening for a while.
Speaker 2: There's real things that are going on there. But I
Speaker 2: do think a third is just this general like risk
Speaker 2: and sentiment barometer, because it's the kind of thing for
Speaker 2: a lot of people where it's not a core part
Speaker 2: of your portfolio. Yes, there are hedge funds that are
Speaker 2: entirely dedicated to digital assets. You can definitely find a
Speaker 2: financial advisor who's like, you're ready, five sure, put all
Speaker 2: your money in bitcoin. That is a thing that exists,
Speaker 2: but for a majority of investment professionals, it's the kind
Speaker 2: of thing where you're like, this is an interesting place
Speaker 2: to diversify, and if the rest of your portfolio is
Speaker 2: underperforming and crypto is doing well, fantastic. But if crypto
Speaker 2: isn't doing well, you might ask, Okay, well should I
Speaker 2: put my money in gold or in silver or something
Speaker 2: else where you might be seeing better and more immediate returns.
Speaker 1: Uniqueness of this space, this asset classes things can turn around.
Speaker 2: Pretty quickly tomorrow, it might be right, we're.
Speaker 1: Seeing Bitcoin climb higher and Cardana and ether. What does
Speaker 1: history tell us about the way rebounds work with cryptocurrencies?
Speaker 1: What makes them stay? What makes it not just an
Speaker 1: anomals blip where we see them going up after a
Speaker 1: huge sell off. What tends to give them staying power?
Speaker 1: And how do you think about that in the context
Speaker 1: of this particular sell off.
Speaker 2: One of the things that I do in the Bloomberg
Speaker 2: terminal is there's a function that lets you like look
Speaker 2: at news events versus prices on a chart, and I
Speaker 2: spend a lot of time staring at that trying to
Speaker 2: figure out, Okay, like what has been driving in crypto.
Speaker 2: And it is true that really significant actions that prop
Speaker 2: up a certain narrative have helped rallies in the past. Right,
Speaker 2: So you know in July of last year, when you know,
Speaker 2: Donald Trump goes to a conference for the bitcoin faithful
Speaker 2: and says like I want to make the United States
Speaker 2: the bitcoin capital of the world, that absolutely precipitated a
Speaker 2: run up that you know kind of peaked for a
Speaker 2: while in January, or you know, going back two years
Speaker 2: when like bitcoin ETFs were approved, or on the other side,
Speaker 2: when Sam Backwinfried got arrested and FTX collapsed and we're like, hah,
Speaker 2: that doesn't seem good. So right now, what's missing is
Speaker 2: this like single thing? So people are like, oh, is
Speaker 2: it going to be the vanguard announcement about ETFs? Is
Speaker 2: it going to be you know, whoever replaces Dero Powers? Yeah,
Speaker 2: And we just haven't seen a big capitalist and we're
Speaker 2: sort of running out of days this year for something
Speaker 2: really big to happen.
Speaker 1: This is the Big Take from Bloomberg News. I'm David Gerat.
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