Speaker 1: This is Bloomberg Crypto, a daily Boomberghart podcast. Am Vil
Speaker 1: Donna hi in for state summary, Ishmael. It's Tuesday, November
Speaker 1: before chaos erupted in the cryptocurrency space following the collapse
Speaker 1: of the ft X cryptocurrencies exchange, Digital acid researcher crypto
Speaker 1: Compare found the bitcoin's value for this year wasn't done declining.
Speaker 1: It appeared that the crypto coin was headed not just
Speaker 1: into a winter, but a possible crypto ice age. The
Speaker 1: data provider reviewed stats from past down turns, finding that Bitcoin,
Speaker 1: the largest digital currency by market value, could continue declining
Speaker 1: into year end, and then, of course, a series of
Speaker 1: previously unthinkable events with news surfacing the crypto's second leading exchange,
Speaker 1: f t X halted Withdrawal's declare bankruptcy and had its CEO,
Speaker 1: Sam Bank and Freed resign. And this sunning downfall sparked
Speaker 1: a whole new, wide ranging market downturn, with Bitcoin falling
Speaker 1: below seventeen thousand dollars of coin, down from sixty nine
Speaker 1: thousand just a year ago. And as the digital assets
Speaker 1: industry continues to adapt to this new post ft X reality,
Speaker 1: what will it all mean for bitcoin's value joining us
Speaker 1: now is Bloomberg Reporter over cariif I think a lot
Speaker 1: of people are still building and hopeful that this is
Speaker 1: sort of a temporary setback. So all that something that
Speaker 1: you and I have been talking about for a really
Speaker 1: long time. Actually we talked about it even back in
Speaker 1: two thousand and eighteen, is the crypto winter, which i'll
Speaker 1: lot of people are familiar with. But now we have
Speaker 1: so many events within the crypto space impacting crypto prices,
Speaker 1: and I want to ask you about what all is
Speaker 1: going on. It's helping to create this maybe we can
Speaker 1: call it this crypto ice age. Sure. So, so it's
Speaker 1: a confluence of two factors. One is macroeconomic sort of
Speaker 1: environmental factors, the FED increasing interest rates that pushes investors
Speaker 1: away from risk assets like cryptocurrencies. This is what essentially
Speaker 1: impacted crypto prices earlier this year, and then later this
Speaker 1: year we just saw a cascade of essentially crypto company
Speaker 1: bankruptcies where a lot of these companies made risky bets
Speaker 1: that didn't turn out right in the environment of following
Speaker 1: crypto prices, and so we saw bankruptcies of companies ranging
Speaker 1: from hedge fund three years capital to uh lender, Celsius
Speaker 1: network to just this month ft X crypto exchange. So
Speaker 1: just to speak to the crazy nature of the last
Speaker 1: couple of days, the ft X implosion and everything that's
Speaker 1: happening in the wake of that, that really is helping
Speaker 1: to spur this humongous plunge in crypto prices and is
Speaker 1: helping create this ice age. Right, Absolutely, it's been you know,
Speaker 1: even people who have been in crypto for all these years,
Speaker 1: they say that this is sort of the biggest implosion,
Speaker 1: the biggest scandal in crypto, if you will, that they've
Speaker 1: ever seen or experienced. So it just sent shock waves
Speaker 1: through investors new to crypto as well as long timers
Speaker 1: who have seen a lot of bad things happen in
Speaker 1: this industry. But even they are shocked and and just
Speaker 1: you know, hugely impacted by what happened, dismayed by everything
Speaker 1: that happened. Yeah, you and I wrote this story that
Speaker 1: said earlier bitcoin bear markets show that its price might
Speaker 1: not have hit bottom. We wrote this a couple of
Speaker 1: days ago, which in the cryptosphere feels like a hundred
Speaker 1: years maybe the way things have been developing the last
Speaker 1: couple of days. But can you talk just a little
Speaker 1: bit more about how within the cryptosphere, because we don't
Speaker 1: really have a lot of fundamentals to be looking at
Speaker 1: right in terms of prices for different coins. So what
Speaker 1: traders tend to do is they're looking at charts, they're
Speaker 1: looking at technical levels, and they're looking at historical data
Speaker 1: and what's happened during past draw downs, right to sort
Speaker 1: of come to these conclusions about whether or not the
Speaker 1: worst is behind us, right, And basically what happens during
Speaker 1: bear markets is that traders rush out of a lot
Speaker 1: of this so called alt coins, you know, coins that
Speaker 1: are not Bitcoin, and either get out of the market
Speaker 1: completely or seek safety in Bitcoin. And so it's very
Speaker 1: helpful to see sort of what happens with bitcoin in
Speaker 1: the bear market it to just figure out have we
Speaker 1: reached bottom or not yet. And crypto Compare did just that,
Speaker 1: and they looked at the downturns that started in thirteen
Speaker 1: and eighteen or seventy late and basically what they found
Speaker 1: was that in both of these downturns, bitcoins price dropped
Speaker 1: by more than eight percent, and sort of before f
Speaker 1: t X collapsed, what crypto Compare found was that, you know,
Speaker 1: so far this crypto winter bitcoin is down by seventy
Speaker 1: something percent, and so crypto compare argued that that means
Speaker 1: that sort of it's not over yet. We could see
Speaker 1: other declines, particularly if they're triggered by sort of major
Speaker 1: macro events. And of course, since that report came out,
Speaker 1: ft X crypto Exchange for bankruptcy, so that definitely triggered
Speaker 1: further declines in bitcoin prices. And I want to go
Speaker 1: back to a point that you were making about institutions
Speaker 1: and how they've been involved, because a big narrative that
Speaker 1: you and I have been writing about over the last
Speaker 1: maybe two years or so is that institutions were stepping
Speaker 1: in and becoming more interested in the crypto space, especially
Speaker 1: as prices were skyrocketing in But can you talk a
Speaker 1: bit more about that sort of hit to reputation or
Speaker 1: hit to trust that we're going through right now and
Speaker 1: experiencing right now, and what it means for institutional investments
Speaker 1: and how much more hesitant maybe they're telling you they
Speaker 1: are about being in the space or being involved in
Speaker 1: this space in any way. So I think it's really
Speaker 1: crucial what what you mentioned there in terms of institutions
Speaker 1: losing trust and crypto. I think that has happened, especially
Speaker 1: over the last week and a half when ft x
Speaker 1: um went bally up up, potentially you know, misusing a
Speaker 1: customer funds. Basically, ft X was the darling of Wall
Speaker 1: Street because it's founder, Sam bank Manfried he worked as
Speaker 1: a trader on James Street, so he spoke Wall Streets language.
Speaker 1: People felt very comfortable with him, you know, being on
Speaker 1: this exchange. And a lot of institutions held accounts on
Speaker 1: FTX crypto exchange, and now their money is stuck on
Speaker 1: the exchange and they don't know when or whether they
Speaker 1: will get this money back. So a lot of large
Speaker 1: institutional investors got hurt by simply, you know, having had
Speaker 1: a relationship with ft X. But more importantly, I think
Speaker 1: a lot of institutions are becoming very much more cautious
Speaker 1: about stepping into crypto. It's been pretty much prices have
Speaker 1: been moving down, down, down, and it's not clear that
Speaker 1: we are at the bottom yet, and it's very risky
Speaker 1: from many institutions standpoint to step into the space when
Speaker 1: we don't even have a full picture of the fallout
Speaker 1: from ftx is bankruptcy. So I think institutions are increasingly
Speaker 1: doing more due diligence or hoping to start to do
Speaker 1: that more, you know, after seeing even sort of well
Speaker 1: regarded firms like FTX going bankrupt and apparently sort of
Speaker 1: not maybe doing everything the way they were supposed to.
Speaker 1: And so most people in crypto who interact with the
Speaker 1: institutions say that they expect that the institutional investors will
Speaker 1: take a breather and kind of step back from investing
Speaker 1: in crypto for for a while. And the other side
Speaker 1: of this, obviously is retail investors. And you and I
Speaker 1: wrote about in the story that we were just talking
Speaker 1: about how retail investors really, even before the ft X
Speaker 1: implosion and some of the other events that we've seen
Speaker 1: happen over the last couple of days, retail investors really
Speaker 1: were scaling back their involvement in the space, whereas in
Speaker 1: you had a lot of retail investors being very excited
Speaker 1: by the price returns that we were seeing in the
Speaker 1: crypto space, and they were stepping in and spending stimulus checks.
Speaker 1: There's STiMi checks some of them on cryptocurrencies and other
Speaker 1: sort of speculative and risky bets. So how important is
Speaker 1: the retail investor to the space, And this is a
Speaker 1: question I also have been asking a lot of people
Speaker 1: I speak with their involvement is so pertinent to this space,
Speaker 1: right and and a lot of them have been getting hurt,
Speaker 1: not just by the implosions earlier in the year, but
Speaker 1: also with what's going on with FTX. Absolutely, I mean
Speaker 1: in general, during crypto bear markets, as we both know,
Speaker 1: you know, retail investors pull back, pull out of the market.
Speaker 1: That's why crypto exchanges generally see much lower revenues, if
Speaker 1: if any revenues at all, or profits rather from you know,
Speaker 1: on the years of the bear markets, retail investors sort
Speaker 1: of stay on the sidelines. They don't want to trade
Speaker 1: very much. What we could see from ftxcess demises is
Speaker 1: so many retail investors got hurt. A lot of them
Speaker 1: have lost trust in crypto and sort of crypto related infrastructure,
Speaker 1: and so they might stay on the sidelines for a while.
Speaker 1: But again, I feel like for both types of investors,
Speaker 1: retail and institutional, you know, if there is some sort
Speaker 1: of price action where prices actually start going up again,
Speaker 1: you know, I suspect that we'll see both of those
Speaker 1: types of investors jumping right back in. Because we've had
Speaker 1: catastrophists in crypto before back inten of course, crypto was
Speaker 1: much smaller back then, the world's biggest bitcoin exchange mogs.
Speaker 1: You know, when bankrupt and it sends shock waves throughout
Speaker 1: the crypto in the street, But you know, some months
Speaker 1: later people got back into crypto, or new people came
Speaker 1: into crypto, and this was forgotten. And I suspect the
Speaker 1: same will happen here as well. Up next, more with
Speaker 1: Bloomberg reporter Olga Karif on whether bitcoins winter might turn
Speaker 1: into a crypto ice age. Just to go back to
Speaker 1: your point about all coins. You mentioned all coins earlier,
Speaker 1: and how much more they tend to get hit during
Speaker 1: these draw downs. This is something that we tend to
Speaker 1: see happen right where smaller coins are less well known
Speaker 1: coins or coins basically that just aren't Bitcoin, tend to
Speaker 1: suffer to a greater degree than Bitcoin itself does. Absolutely,
Speaker 1: and and I think that makes sense. They tend to
Speaker 1: be riskier to begin with because fewer people hold them,
Speaker 1: so price moves can be more severe in one direction
Speaker 1: or another. During bullmarkets, Uh, you know, you can make
Speaker 1: more money potentially in olt coins, but of course during
Speaker 1: bear markets, a lot of the coins actually go into
Speaker 1: the zombie mode where they're not trading at all. I mean,
Speaker 1: thousands of coins became zombies this year, along actually the
Speaker 1: most coins ever. Yeah, you had a great story on this,
Speaker 1: thank you, and so so I think people perceive all
Speaker 1: of crypto to be very risky right now, and especially
Speaker 1: out coins, and maybe we can end possibly on a
Speaker 1: more hopeful note. But what the crypto people and people
Speaker 1: who are involved in this space, what do they have
Speaker 1: to tell you when you are asking them about the
Speaker 1: future and what's next. As you said, we still have
Speaker 1: yet to see everything that happens in the wake of
Speaker 1: the FTX fall up. But once we passed all of that,
Speaker 1: what are people within the space expecting to see? Well,
Speaker 1: I think on the most hopeful note, a lot of
Speaker 1: people say that all of the catastrophes that happen this
Speaker 1: year basically are gonna possibly speed up additional laws and
Speaker 1: regulations that will make it completely clear what you can
Speaker 1: and cannot do in crypto, or will make it more
Speaker 1: clear than it is today. Rather and essentially additional regulation
Speaker 1: will help legitimize this industry, you know, in the coming months,
Speaker 1: once it's this groundwork is laid out, and you know,
Speaker 1: a lot of people are still building. They believe that
Speaker 1: maybe uh ftxcess bankruptcy will push more people to look
Speaker 1: more at decentralized finance applications, which allow people to trade,
Speaker 1: borrow and land without intermediaries with out centralized parties. I
Speaker 1: think a lot of people are still building and hopeful
Speaker 1: that this is sort of a temporary setback. But again
Speaker 1: the question is how temporary it could be a while.
Speaker 1: Thank you so much Aga for joining us and for
Speaker 1: all your insights, and also thank you so much for
Speaker 1: all the great reporting you've been doing on crypto markets
Speaker 1: and everything that's been going on with the FTX fallout.
Speaker 1: Right back at you. You've you've been doing amazing stories
Speaker 1: and and I got a chance to do a few
Speaker 1: of the stories together with you, which was really fun,
Speaker 1: and and thank you so much. I'm blushed like anybody
Speaker 1: who can't see us, which is everybody. Thank you, Thank you.
Speaker 1: You can find more of Olga's reporting on the Bloomberg
Speaker 1: Terminal and on Bloomberg dot com, and for more, be
Speaker 1: sure to check out our twice weekly newsletter, Bloomberg Crypto.
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