WEBVTT - Is Bitcoin Still Heading Into an Ice Age? 0:00:03.160 --> 0:00:07.440 This is Bloomberg Crypto, a daily Boomberghart podcast. Am Vil 0:00:07.480 --> 0:00:10.800 Donna hi in for state summary, Ishmael. It's Tuesday, November 0:00:25.320 --> 0:00:28.720 before chaos erupted in the cryptocurrency space following the collapse 0:00:28.800 --> 0:00:33.120 of the ft X cryptocurrencies exchange, Digital acid researcher crypto 0:00:33.159 --> 0:00:36.640 Compare found the bitcoin's value for this year wasn't done declining. 0:00:37.400 --> 0:00:39.760 It appeared that the crypto coin was headed not just 0:00:39.840 --> 0:00:45.519 into a winter, but a possible crypto ice age. The 0:00:45.600 --> 0:00:49.320 data provider reviewed stats from past down turns, finding that Bitcoin, 0:00:49.680 --> 0:00:53.600 the largest digital currency by market value, could continue declining 0:00:53.680 --> 0:00:57.280 into year end, and then, of course, a series of 0:00:57.440 --> 0:01:02.560 previously unthinkable events with news surfacing the crypto's second leading exchange, 0:01:02.840 --> 0:01:07.200 f t X halted Withdrawal's declare bankruptcy and had its CEO, 0:01:07.360 --> 0:01:11.640 Sam Bank and Freed resign. And this sunning downfall sparked 0:01:11.680 --> 0:01:15.600 a whole new, wide ranging market downturn, with Bitcoin falling 0:01:15.600 --> 0:01:19.399 below seventeen thousand dollars of coin, down from sixty nine 0:01:19.400 --> 0:01:22.520 thousand just a year ago. And as the digital assets 0:01:22.560 --> 0:01:25.800 industry continues to adapt to this new post ft X reality, 0:01:26.319 --> 0:01:29.640 what will it all mean for bitcoin's value joining us 0:01:29.640 --> 0:01:32.319 now is Bloomberg Reporter over cariif I think a lot 0:01:32.360 --> 0:01:35.720 of people are still building and hopeful that this is 0:01:35.760 --> 0:01:53.280 sort of a temporary setback. So all that something that 0:01:53.320 --> 0:01:54.800 you and I have been talking about for a really 0:01:54.800 --> 0:01:56.960 long time. Actually we talked about it even back in 0:01:57.000 --> 0:01:59.960 two thousand and eighteen, is the crypto winter, which i'll 0:02:00.040 --> 0:02:02.360 lot of people are familiar with. But now we have 0:02:02.720 --> 0:02:07.240 so many events within the crypto space impacting crypto prices, 0:02:07.480 --> 0:02:09.800 and I want to ask you about what all is 0:02:09.800 --> 0:02:12.760 going on. It's helping to create this maybe we can 0:02:12.800 --> 0:02:16.560 call it this crypto ice age. Sure. So, so it's 0:02:16.560 --> 0:02:21.480 a confluence of two factors. One is macroeconomic sort of 0:02:21.560 --> 0:02:27.320 environmental factors, the FED increasing interest rates that pushes investors 0:02:27.360 --> 0:02:33.040 away from risk assets like cryptocurrencies. This is what essentially 0:02:33.080 --> 0:02:37.200 impacted crypto prices earlier this year, and then later this 0:02:37.280 --> 0:02:42.359 year we just saw a cascade of essentially crypto company 0:02:42.480 --> 0:02:46.760 bankruptcies where a lot of these companies made risky bets 0:02:47.000 --> 0:02:50.320 that didn't turn out right in the environment of following 0:02:50.360 --> 0:02:56.120 crypto prices, and so we saw bankruptcies of companies ranging 0:02:56.240 --> 0:03:02.160 from hedge fund three years capital to uh lender, Celsius 0:03:02.240 --> 0:03:08.800 network to just this month ft X crypto exchange. So 0:03:08.960 --> 0:03:11.800 just to speak to the crazy nature of the last 0:03:11.800 --> 0:03:16.320 couple of days, the ft X implosion and everything that's 0:03:16.360 --> 0:03:19.000 happening in the wake of that, that really is helping 0:03:19.040 --> 0:03:23.680 to spur this humongous plunge in crypto prices and is 0:03:23.720 --> 0:03:28.000 helping create this ice age. Right, Absolutely, it's been you know, 0:03:28.160 --> 0:03:31.280 even people who have been in crypto for all these years, 0:03:31.280 --> 0:03:34.760 they say that this is sort of the biggest implosion, 0:03:34.960 --> 0:03:38.240 the biggest scandal in crypto, if you will, that they've 0:03:38.280 --> 0:03:42.800 ever seen or experienced. So it just sent shock waves 0:03:42.880 --> 0:03:47.560 through investors new to crypto as well as long timers 0:03:47.560 --> 0:03:50.320 who have seen a lot of bad things happen in 0:03:50.360 --> 0:03:53.320 this industry. But even they are shocked and and just 0:03:53.960 --> 0:03:57.640 you know, hugely impacted by what happened, dismayed by everything 0:03:57.640 --> 0:04:00.240 that happened. Yeah, you and I wrote this story that 0:04:00.400 --> 0:04:04.160 said earlier bitcoin bear markets show that its price might 0:04:04.160 --> 0:04:06.480 not have hit bottom. We wrote this a couple of 0:04:06.520 --> 0:04:10.240 days ago, which in the cryptosphere feels like a hundred 0:04:10.320 --> 0:04:13.960 years maybe the way things have been developing the last 0:04:14.000 --> 0:04:16.840 couple of days. But can you talk just a little 0:04:16.839 --> 0:04:19.719 bit more about how within the cryptosphere, because we don't 0:04:19.720 --> 0:04:22.000 really have a lot of fundamentals to be looking at 0:04:22.120 --> 0:04:25.000 right in terms of prices for different coins. So what 0:04:25.080 --> 0:04:27.200 traders tend to do is they're looking at charts, they're 0:04:27.240 --> 0:04:30.159 looking at technical levels, and they're looking at historical data 0:04:30.160 --> 0:04:33.479 and what's happened during past draw downs, right to sort 0:04:33.480 --> 0:04:36.080 of come to these conclusions about whether or not the 0:04:36.120 --> 0:04:40.360 worst is behind us, right, And basically what happens during 0:04:40.400 --> 0:04:43.880 bear markets is that traders rush out of a lot 0:04:43.920 --> 0:04:46.719 of this so called alt coins, you know, coins that 0:04:46.760 --> 0:04:50.680 are not Bitcoin, and either get out of the market 0:04:50.720 --> 0:04:55.440 completely or seek safety in Bitcoin. And so it's very 0:04:55.520 --> 0:04:59.200 helpful to see sort of what happens with bitcoin in 0:04:59.279 --> 0:05:02.320 the bear market it to just figure out have we 0:05:02.440 --> 0:05:06.640 reached bottom or not yet. And crypto Compare did just that, 0:05:06.839 --> 0:05:10.880 and they looked at the downturns that started in thirteen 0:05:11.240 --> 0:05:18.280 and eighteen or seventy late and basically what they found 0:05:18.480 --> 0:05:22.600 was that in both of these downturns, bitcoins price dropped 0:05:22.640 --> 0:05:27.000 by more than eight percent, and sort of before f 0:05:27.160 --> 0:05:30.840 t X collapsed, what crypto Compare found was that, you know, 0:05:31.080 --> 0:05:35.719 so far this crypto winter bitcoin is down by seventy 0:05:35.920 --> 0:05:41.360 something percent, and so crypto compare argued that that means 0:05:41.480 --> 0:05:44.559 that sort of it's not over yet. We could see 0:05:44.920 --> 0:05:49.240 other declines, particularly if they're triggered by sort of major 0:05:49.880 --> 0:05:53.680 macro events. And of course, since that report came out, 0:05:54.360 --> 0:06:00.400 ft X crypto Exchange for bankruptcy, so that definitely triggered 0:06:01.240 --> 0:06:05.640 further declines in bitcoin prices. And I want to go 0:06:05.680 --> 0:06:08.360 back to a point that you were making about institutions 0:06:08.360 --> 0:06:10.880 and how they've been involved, because a big narrative that 0:06:10.920 --> 0:06:12.640 you and I have been writing about over the last 0:06:12.640 --> 0:06:16.000 maybe two years or so is that institutions were stepping 0:06:16.000 --> 0:06:19.320 in and becoming more interested in the crypto space, especially 0:06:19.360 --> 0:06:23.960 as prices were skyrocketing in But can you talk a 0:06:24.000 --> 0:06:27.400 bit more about that sort of hit to reputation or 0:06:27.480 --> 0:06:29.800 hit to trust that we're going through right now and 0:06:29.839 --> 0:06:33.200 experiencing right now, and what it means for institutional investments 0:06:33.200 --> 0:06:36.800 and how much more hesitant maybe they're telling you they 0:06:36.800 --> 0:06:39.839 are about being in the space or being involved in 0:06:39.880 --> 0:06:43.119 this space in any way. So I think it's really 0:06:43.240 --> 0:06:46.160 crucial what what you mentioned there in terms of institutions 0:06:46.240 --> 0:06:49.920 losing trust and crypto. I think that has happened, especially 0:06:50.520 --> 0:06:53.600 over the last week and a half when ft x 0:06:53.839 --> 0:06:58.040 um went bally up up, potentially you know, misusing a 0:06:58.080 --> 0:07:03.120 customer funds. Basically, ft X was the darling of Wall 0:07:03.160 --> 0:07:08.440 Street because it's founder, Sam bank Manfried he worked as 0:07:08.440 --> 0:07:12.160 a trader on James Street, so he spoke Wall Streets language. 0:07:12.440 --> 0:07:17.960 People felt very comfortable with him, you know, being on 0:07:18.040 --> 0:07:21.960 this exchange. And a lot of institutions held accounts on 0:07:22.240 --> 0:07:25.520 FTX crypto exchange, and now their money is stuck on 0:07:25.600 --> 0:07:28.200 the exchange and they don't know when or whether they 0:07:28.200 --> 0:07:31.760 will get this money back. So a lot of large 0:07:31.760 --> 0:07:36.080 institutional investors got hurt by simply, you know, having had 0:07:36.120 --> 0:07:39.280 a relationship with ft X. But more importantly, I think 0:07:39.320 --> 0:07:44.440 a lot of institutions are becoming very much more cautious 0:07:44.480 --> 0:07:49.680 about stepping into crypto. It's been pretty much prices have 0:07:49.760 --> 0:07:53.280 been moving down, down, down, and it's not clear that 0:07:53.320 --> 0:07:56.880 we are at the bottom yet, and it's very risky 0:07:57.000 --> 0:08:01.320 from many institutions standpoint to step into the space when 0:08:01.320 --> 0:08:04.080 we don't even have a full picture of the fallout 0:08:04.200 --> 0:08:09.800 from ftx is bankruptcy. So I think institutions are increasingly 0:08:09.840 --> 0:08:14.480 doing more due diligence or hoping to start to do 0:08:14.520 --> 0:08:18.640 that more, you know, after seeing even sort of well 0:08:18.720 --> 0:08:24.880 regarded firms like FTX going bankrupt and apparently sort of 0:08:24.920 --> 0:08:27.400 not maybe doing everything the way they were supposed to. 0:08:28.240 --> 0:08:31.760 And so most people in crypto who interact with the 0:08:31.800 --> 0:08:36.040 institutions say that they expect that the institutional investors will 0:08:36.080 --> 0:08:38.679 take a breather and kind of step back from investing 0:08:39.120 --> 0:08:43.520 in crypto for for a while. And the other side 0:08:43.520 --> 0:08:46.480 of this, obviously is retail investors. And you and I 0:08:46.480 --> 0:08:48.800 wrote about in the story that we were just talking 0:08:48.800 --> 0:08:52.719 about how retail investors really, even before the ft X 0:08:52.800 --> 0:08:55.880 implosion and some of the other events that we've seen 0:08:56.200 --> 0:08:59.040 happen over the last couple of days, retail investors really 0:08:59.080 --> 0:09:02.640 were scaling back their involvement in the space, whereas in 0:09:04.720 --> 0:09:07.760 you had a lot of retail investors being very excited 0:09:07.800 --> 0:09:09.840 by the price returns that we were seeing in the 0:09:09.840 --> 0:09:13.080 crypto space, and they were stepping in and spending stimulus checks. 0:09:13.080 --> 0:09:16.400 There's STiMi checks some of them on cryptocurrencies and other 0:09:16.840 --> 0:09:19.960 sort of speculative and risky bets. So how important is 0:09:20.360 --> 0:09:22.439 the retail investor to the space, And this is a 0:09:22.520 --> 0:09:24.880 question I also have been asking a lot of people 0:09:24.920 --> 0:09:28.840 I speak with their involvement is so pertinent to this space, 0:09:28.920 --> 0:09:31.280 right and and a lot of them have been getting hurt, 0:09:31.400 --> 0:09:33.960 not just by the implosions earlier in the year, but 0:09:34.040 --> 0:09:38.520 also with what's going on with FTX. Absolutely, I mean 0:09:38.600 --> 0:09:42.800 in general, during crypto bear markets, as we both know, 0:09:42.960 --> 0:09:46.280 you know, retail investors pull back, pull out of the market. 0:09:46.400 --> 0:09:51.920 That's why crypto exchanges generally see much lower revenues, if 0:09:51.960 --> 0:09:56.000 if any revenues at all, or profits rather from you know, 0:09:56.080 --> 0:09:59.880 on the years of the bear markets, retail investors sort 0:09:59.880 --> 0:10:02.160 of stay on the sidelines. They don't want to trade 0:10:02.280 --> 0:10:07.960 very much. What we could see from ftxcess demises is 0:10:08.080 --> 0:10:12.160 so many retail investors got hurt. A lot of them 0:10:12.360 --> 0:10:18.040 have lost trust in crypto and sort of crypto related infrastructure, 0:10:18.200 --> 0:10:21.040 and so they might stay on the sidelines for a while. 0:10:21.160 --> 0:10:25.000 But again, I feel like for both types of investors, 0:10:25.040 --> 0:10:29.240 retail and institutional, you know, if there is some sort 0:10:29.280 --> 0:10:33.520 of price action where prices actually start going up again, 0:10:34.040 --> 0:10:37.880 you know, I suspect that we'll see both of those 0:10:37.880 --> 0:10:41.640 types of investors jumping right back in. Because we've had 0:10:41.760 --> 0:10:47.360 catastrophists in crypto before back inten of course, crypto was 0:10:47.520 --> 0:10:53.720 much smaller back then, the world's biggest bitcoin exchange mogs. 0:10:54.200 --> 0:10:58.680 You know, when bankrupt and it sends shock waves throughout 0:10:59.200 --> 0:11:01.480 the crypto in the street, But you know, some months 0:11:01.559 --> 0:11:05.719 later people got back into crypto, or new people came 0:11:05.760 --> 0:11:09.040 into crypto, and this was forgotten. And I suspect the 0:11:09.120 --> 0:11:12.640 same will happen here as well. Up next, more with 0:11:12.679 --> 0:11:16.040 Bloomberg reporter Olga Karif on whether bitcoins winter might turn 0:11:16.080 --> 0:11:29.400 into a crypto ice age. Just to go back to 0:11:29.400 --> 0:11:32.160 your point about all coins. You mentioned all coins earlier, 0:11:32.160 --> 0:11:35.000 and how much more they tend to get hit during 0:11:35.040 --> 0:11:37.880 these draw downs. This is something that we tend to 0:11:37.920 --> 0:11:41.720 see happen right where smaller coins are less well known 0:11:41.800 --> 0:11:45.600 coins or coins basically that just aren't Bitcoin, tend to 0:11:45.640 --> 0:11:50.560 suffer to a greater degree than Bitcoin itself does. Absolutely, 0:11:50.679 --> 0:11:53.920 and and I think that makes sense. They tend to 0:11:53.960 --> 0:11:59.160 be riskier to begin with because fewer people hold them, 0:11:59.240 --> 0:12:04.400 so price moves can be more severe in one direction 0:12:04.760 --> 0:12:09.040 or another. During bullmarkets, Uh, you know, you can make 0:12:09.720 --> 0:12:13.040 more money potentially in olt coins, but of course during 0:12:13.120 --> 0:12:16.679 bear markets, a lot of the coins actually go into 0:12:16.760 --> 0:12:20.760 the zombie mode where they're not trading at all. I mean, 0:12:20.880 --> 0:12:26.640 thousands of coins became zombies this year, along actually the 0:12:26.640 --> 0:12:30.079 most coins ever. Yeah, you had a great story on this, 0:12:30.600 --> 0:12:36.080 thank you, and so so I think people perceive all 0:12:36.120 --> 0:12:40.160 of crypto to be very risky right now, and especially 0:12:40.160 --> 0:12:44.320 out coins, and maybe we can end possibly on a 0:12:44.520 --> 0:12:47.000 more hopeful note. But what the crypto people and people 0:12:47.040 --> 0:12:49.680 who are involved in this space, what do they have 0:12:49.760 --> 0:12:51.880 to tell you when you are asking them about the 0:12:51.920 --> 0:12:54.920 future and what's next. As you said, we still have 0:12:55.000 --> 0:12:57.520 yet to see everything that happens in the wake of 0:12:57.559 --> 0:12:59.880 the FTX fall up. But once we passed all of that, 0:13:00.400 --> 0:13:05.160 what are people within the space expecting to see? Well, 0:13:05.280 --> 0:13:08.080 I think on the most hopeful note, a lot of 0:13:08.120 --> 0:13:11.600 people say that all of the catastrophes that happen this 0:13:11.720 --> 0:13:16.960 year basically are gonna possibly speed up additional laws and 0:13:17.040 --> 0:13:21.200 regulations that will make it completely clear what you can 0:13:21.320 --> 0:13:25.640 and cannot do in crypto, or will make it more 0:13:25.679 --> 0:13:31.000 clear than it is today. Rather and essentially additional regulation 0:13:31.200 --> 0:13:35.960 will help legitimize this industry, you know, in the coming months, 0:13:36.360 --> 0:13:41.240 once it's this groundwork is laid out, and you know, 0:13:41.280 --> 0:13:43.719 a lot of people are still building. They believe that 0:13:43.840 --> 0:13:50.280 maybe uh ftxcess bankruptcy will push more people to look 0:13:50.320 --> 0:13:56.319 more at decentralized finance applications, which allow people to trade, 0:13:56.400 --> 0:14:02.440 borrow and land without intermediaries with out centralized parties. I 0:14:02.480 --> 0:14:05.720 think a lot of people are still building and hopeful 0:14:05.880 --> 0:14:08.959 that this is sort of a temporary setback. But again 0:14:09.000 --> 0:14:11.760 the question is how temporary it could be a while. 0:14:15.760 --> 0:14:17.800 Thank you so much Aga for joining us and for 0:14:17.840 --> 0:14:20.440 all your insights, and also thank you so much for 0:14:20.480 --> 0:14:22.600 all the great reporting you've been doing on crypto markets 0:14:22.600 --> 0:14:25.560 and everything that's been going on with the FTX fallout. 0:14:26.160 --> 0:14:29.120 Right back at you. You've you've been doing amazing stories 0:14:29.160 --> 0:14:31.640 and and I got a chance to do a few 0:14:31.680 --> 0:14:34.240 of the stories together with you, which was really fun, 0:14:34.440 --> 0:14:38.000 and and thank you so much. I'm blushed like anybody 0:14:38.000 --> 0:14:42.760 who can't see us, which is everybody. Thank you, Thank you. 0:14:43.560 --> 0:14:45.840 You can find more of Olga's reporting on the Bloomberg 0:14:45.920 --> 0:14:48.680 Terminal and on Bloomberg dot com, and for more, be 0:14:48.720 --> 0:14:51.840 sure to check out our twice weekly newsletter, Bloomberg Crypto. 0:14:57.960 --> 0:15:01.120 This is Bloomberg Crypto, a dearly podcast from Bloomberg and 0:15:01.160 --> 0:15:04.120 I Heart Radio For more shows from I Heart Radio, 0:15:04.360 --> 0:15:07.440 visit the I Heart Radio app, Apple Podcasts, or wherever 0:15:07.520 --> 0:15:11.040 you get your podcasts. Send us your comments, questions, or 0:15:11.080 --> 0:15:14.080 suggestions for the show to Crypto at Bloomberg dot net. 0:15:17.280 --> 0:15:21.000 The supervising producer of Bloomberg Crypto is Vicky Verglina. Our 0:15:21.040 --> 0:15:24.840 senior producer is Janet Babin. Our producers are Mohammed Faruk 0:15:24.920 --> 0:15:28.320 and Sharon Barriro. Our associate producers are Ty Butler and 0:15:28.360 --> 0:15:32.680 Moses on Them. Desta wonder At is our engineer. Original 0:15:32.760 --> 0:15:37.480 music by Leo Sidrin. I'm Stacy Marie Schmal. We'll be 0:15:37.520 --> 0:15:38.040 back tomorrow.