Bloomberg Crypto Full Show (06/07/2022)
We're live from Bloomberg's world headquarters in New York City on Matt Miller. And I'm Kelly Lyons. Welcome to Bloomberg Quicktake. A look at the people transactions and technology shaping the world and decentralized finance. Coming up Bitcoin can't escape the thirty thousand dollar level as tighter policy and tougher regulations weigh on the market. We'll talk strategy with the head of RTS options trading at the crypto exchange cracking and waiting for Gary Gensler Ken Griffin. Citadel is among the firms betting on demand for a future US spot Bitcoin ETF. We'll discuss the regulatory uncertainty with Greg King CEO of Osprey Fund. Plus as the crypto winter lingers we've got a wrap on all the issues plaguing the industry from job cuts and a lobster that Gemini to an investigation underway into buying DAX. All of that is ahead.
And all of those headwinds together are weighing on the market. The best way to see a snapshot of it on your Bloomberg terminal is see our why he go. That is your function. But I selected a few individual tokens here. Bitcoin of course has been trading in and around that thirty thousand dollar level for some time now just above or below it. As is the case today right now trading at twenty nine thousand eight hundred eighty dollars down about 5 percent. You have either down 4 percent Solana down 7 percent. And of course finance queen BNP Matt just mentioned this is in the headlines today. The SCC probing that initial queen offering all the way back in twenty seventeen when it was just getting off the ground. Did they break any rules and what
does that mean. Finance going down about three point six percent at the moment Matt. Then what does it mean for all the other thousands of coins that have I see owed. I'm looking at a chart that actually Kelly pointed out shared with me. I think it's truly fascinating. This shows that if you invest during the stock market trading session this is the white line here that is
if you buy at the open and sell at the close you're basically unchanged. But if you buy at the close and sell at the open that is you invest. When the stock market isn't open then you've made two hundred and sixty eight percent since December of nineteen. So I think really interesting once again showing that if you trade outside of market hours you do a lot better in crypto. Now
that being said Bitcoin is back around 30 thousand dollars been stuck there for weeks. It briefly breaks above 31 or below twenty nine. But where do we go from here. Financial leaders have weighed in. It has moved up. It has moved down. It goes up and down. Volatility is just a huge part of emerging technology. Bitcoin is a teenager this year. Keep calm and carry on. We still have the headwinds of regulation and central bank digital currencies. It should be quite negative. We've had a number of pullbacks in crypto since its start and it
has survived each one. A lot of trust has been broken. After we got to 60 I thought we were correct 30 we got there at thirty thousand dollar level. Seems to be an unbelievably strong support. We'd be a thirty thousand fifty thousand range in bitcoin if we break below that. We're gonna have some serious problem. Five years out bitcoin is not a five hundred thousand. I'm wrong on the adoption cycle somewhere between 14 18 game maybe 20 to game we were probably going to hit eight thousand. Now the collapse of Terra Luna and the entire ecosystem there has really further undermine confidence in the crypto space. But even though investors were burned many of them by the failed block chain many exchanges are still embracing. Now Tara's new
Luna tokens. Sonali Basak has the details. Sonali. Yeah. Thank you Matt. We have to talk about Luna 2.0 because it's emerged as a way of compensation for investors around the world who lost billions of dollars in the wake of the terror meltdown. The new token went live a little over a week ago and it was part of a plan and a community approved proposal by Terry's main backer Doc Quan. The original Terra BLOCK chain is now known as Terra Classic and the
new terror block chain does not include the U.S. t stable coin. This token debut got off to a rocky start. And among the issues various trading platforms showed differing prices after the tokens were awarded in a process referred to as an airdrop and airdrop as a way of sending tokens directly to wallets and can be used for various purposes. And while Luna 2.0 has generated plenty of volatility and buzz it is also generating criticism. We have Jesse Powell the CEO of Crypto Exchange Crackin who took to Twitter to defend his platforms listing of New Luna 2.0 and he cited client demand as the main justification crack and isn't alone. A number of other exchanges have also supported it and critics
are now questioning whether it's appropriate or even ethical given the collapse of the original terra ecosystem. All right. Bloomberg Sonali Basak great breakdown as always. Thank you so much. Now joining us to discuss this further is Jessica Chow head of ATC Options Trading at Crack. And Jessica. Great to speak with you. What kind of demand and activity are you seeing around Luna to point out. Well it's fairly diversified demand you know and as Jesse
pointed out it is our job to be agnostic. We list tokens in general in response to declining demand which is usually some amount of prejudice and some amount of speculators. And I think the exchange is seeing very similar dynamics there. As you guys pointed out there's no stable coin associated with this one. But we still see stable client activity on the RTS desk. And so that stable clients in general aren't going anywhere despite some of those played out. But I think in general the demand is fairly
representative of our diverse global client base. And that's what we see with all the tokens that we have listed. I want to get down to the bottom of why Bitcoin hasn't broken out of this range. You know we expected and as Michael Novogratz was saying in the tape that we just played Bitcoin bounces back and forth between thirty thousand fifty thousand. But this time it just hovered down there. And our own David Pan at Bloomberg News wrote a great story over the weekend pointing out that miners have moved a ton of tokens onto exchanges maybe selling maybe not. What do you think is holding bitcoin in that range. Yeah so we're seeing the kind of both factors the bullish and the bearish sort of play out at once and oftentimes I'm in the matter of just a couple days. So on the bullish side we are seeing accumulation as we dip into high 28 k's low twenty 90s.
There are institutions that are starting to dip their toes again starting to allocate capital. Adding to core positions or initiating positions if they were kind of on the sidelines. But at the same time there's a ton of just skittishness and uncertainty. There's the macro backdrop. There's the crypto regulatory backdrop. And I think there's a little bit of a pain
from folks who have held our longs and crypto and in the broader market down through this sell off. And so some of them are taking these you know 5 6 8 percent moves as opportunities to get out a little bit if they were underwater or they'd need the liquidity into. Those two dynamics have been playing back and forth over the last couple weeks and this year to three K range that we've been in. In terms of the breakdown know retail and institutional what are you seeing and how has it changed over your tenure at cracking. Also on the RTS desk we're more focused on on the institutional side but that encompasses both kind of the traditional funds as well as high net worth individual retail. And so we're still
seeing both quite active but to the nature of trading is a little bit different. So in particular one area on the option side that we're seeing is more yield generating strategies. And I think when you have a bull market when prices are just going up and all the coins are doubling in the course of weeks people aren't as interested in yield generating strategies because because they can just make 100 percent in the course of a month. But in this market in a sideways market we are seeing
institutions in retail come more for call overwriting and more traditional yield generating strategies that are maybe not as compelling when there are a lot of easy gains in a bull market. Well we actually do a survey here at Bloomberg Markets live team rather does the NY Post survey. They talked about what assets are at greatest risk because of quantitative tightening. And the number one answer was crypto. How are you seeing kind of volumes changing as we are moving into a policy environment which is no longer so easy and money is no longer free. Well you know I think it kind of works for crypto. I get the good with the bad. And so now that it trades as a macro asset even though it's it is at risk because cash is king at the end of the day. And when you when people are delivering sometimes that comes into crypto. At the same time we're still seeing a
healthy amount of activity because it is moving with the broader market. So unlike prior crypto winters or bear markets where crypto was so idiosyncratic and separated and nobody cared about it. When you you know when price had gone down in this case we are seeing it move. We're seeing it move with fund announcements and changes to the macro backdrop. So volume remains strong because of that aspect even though it does remain volatile. Well people certainly care about it now do you. That guy and that definitely includes regulators. We actually heard someone from the Federal Reserve Fed Governor Chris Waller speaking last week weighing in on the need for clearer rules in the industry saying quote The main issue in crypto asset regulation isn't how to protect sophisticated crypto investors. It's how to protect the rest of us. Jessica how do you approach protecting your clients
at cracking. Well we take it into account and a whole host of ways from the regulatory side through the security side. But I think in general you know a lot of things like comments like that are not too different from what the industry cares about in the industry whether it's the end user or the exchanges. They care about
prices that are not susceptible to manipulation. They care about security for the end user and custody. You know obviously anti fraud. So all those things I think everybody from the exchanges to traders to the regulators care about and more regulatory certainty I think is not going to be a bad thing because at the end of the day everybody knows that regulation is coming and it's the ambiguous and uncertain nature. And that is probably more of the overhang over the markets at the moment. All right. Very cool to get your knowledge on this program do you think. Thanks so much for joining us. Take a child there. Head of RTS options trading at crackin. Coming up Greg King CEO of crypto investment firm Osprey Funds. We'll probably talk with him a little bit more about regulation and more trouble for the Winklevoss twins. Winkel by ISE. Matt would say their company is
being sued over their Bitcoin futures contract to access all the latest data and news on crypto on the Bloomberg terminal. Just type C R Y P go. We're adding more every day. This is Bloomberg. Welcome back to Bloomberg Crypto. I'm Kelly Line and I'm Matt Miller. Twenty twenty two has been rough for crypto linked RTX.
Bloomberg data shows the six worst performing non leveraged ETF this year all tied to crypto the sixty three million dollar Global X block chain ETF. The ticker is B.K. Casey H is the biggest loser down 64 percent year to date. The other five have all seen declines of at least fifty five percent so far this year. That's as fading speculative fervor and tightening monetary policy especially have really dragged down bitcoin and slammed the stocks of public companies involved with digital assets. Joining us now is the CEO of crypto investment firm Osprey Funds Greg King. Greg thanks so much for coming on the program today. What do you think needs to change. And I'm guessing regulation is at least
part of the equation in order to bring more stability back to crypto more confidence in the crypto universe and get people more interested again. Yeah I think it's great to be here by the way. I think regulation is obviously a key part of it. But you know we've gotten this far far with a lot out a lot of regulation or clarity. Me by the way you miss the Russia ETF. The Russia ETF have
actually done worse. They're down 80 percent but it still hasn't been a great year for block chain. You know the Lummis bill could take a major step forward. I think there's a lot in there that's interesting and that's constructive. Not sure how likely it will be to pass in its existing form but I think it puts forward a lot of interesting points. And then of course you have
the spot Bitcoin narrative that continues with an upcoming decision in the next few weeks. But clarity to American literary perspective is definitely needed. We don't know whether these things are securities or commodities. And that's I think the major point for a lot of product providers and investment managers. Well great. Obviously you operate the Osprey Bitcoin Trust o BTC. It's a lower fee only forty nine basis points which is about a seventy five percent discount I believe. Grace Scales GTC and we know that Freescale is trying to get that turned into an ETF. It is waiting on the S.E.C. What do you think the prospects are around that. Well I mean they're not the first ones right. We've had a lot of
bite of the apple here and we've watched this for years and maintain a dialogue with the FCC. I think a lot of the bogies that were first identified by DeLay Blast in her letter in 2018 is the Investment Company Institute have been hurdles. So things like custody. A lot of the issues there have been addressed pretty I think completely. The one that remains in my mind is the concern around market manipulation. And the FCC and U.S. regulators really don't have purview into the global trading that happens on crypto generally. Or just talk about Bitcoin. But even Bitcoin you is trading 80 percent offshore and that's a
that's an issue for them. So not sure how to address that. I think the industry's proposed different things like linking to U.S. exchange prices only. But the issue is these assets are fungible. And so what happens say in Asia over the weekend will affect global prices. There's just no two ways about it. So be interesting to see how that develops especially in the next few
weeks. Why do you think it is that there is so much focus on a spot ETF. Just another investment vehicle when you have the ability to invest in these coins directly why do you need it packaged in an ETF or an ETF. U.S. S&P specifically right. There are obviously other countries. Yeah. Yeah. Well I mean it goes down to it all sort of gets back to constraints right. Portfolio constraints and regulatory constraints. You know U.S. investors can't necessarily access
investments in other countries. And it boils down to fiduciary responsibility. And a lot of cases most people of affluence have a money manager. Right. Somebody who's looking over their funds managing their assets. And those folks don't necessarily have a way to port in crypto accounts into their systems into their kind of process of management. The ETF has historically been a very extensible way to get broad based exposure into traditional portfolios. You know it acts like a stock. And so I think that the U.S. investing landscape
is just accustomed to that tool being present. And when it gets a hold of that in the Bitcoin space I think you're going to see a lot of new folks. By the way credit. Greg to you I'd just look through ETF go and found three ETF related to Russia R US at FTSE R U.S. U at eleven and CSR. You would ask W of course they all trade outside the US but they're all down 80 percent or more. So that's absolutely right. But what do you think we need to see in terms of regulations
across the different agencies. Does the S.E.C. need to split things with the CFTC. Does one need to take the lead or the other. Yeah you know I'm not an expert on the differences I would. I would say that you know that the FCC and the FCC for a bunch of reasons beyond even crypto probably need a closer collaboration. I know that's been a move that's been supported by from a bipartisan basis lately but it's still hasn't happened. I would love to see those agencies integrated over time. I think the US is a bit of an anomaly in the sense that we have so many different regulators. You think about the Fed the RTS there's
there's more than just even this. As we see in CFTC we would support something that is broad based and comprehensive in terms of crypto regulation. I think trying to shoehorn it into the existing landscape is just problematic. I mean those of us developing products are working with the 33 34 and the 40 act and that's ISE in nineteen thirty three for 14. And so you know I'm all so great. Actually it was pretty good. But you know it's 82 years since we've got
the 40 act and a lot has happened. So I think we need some comprehensive overhaul here. I don't know that that crypto is going to facilitate that but very excited to see a bill put forward that is somewhat comprehensive. I know they're proposing the CFTC take control. And to me that's a political debate and we can steer clear of that. But what our task would be is it's a educated and engaged and proactive regulator who's not looking to squash economic activity but to just provide guardrails so that investors and investment companies can meet with products that makes sense that the investing public wants. Yeah we'll see how much of the contents within that bill proposed by Senators Gellibrand and Loomis actually is able to be passed. Thank you so much to Greg CAC of Offspring Funds. Now coming up the Winklevoss twins Gemini Trust is being sued over their Bitcoin futures contracts. We'll have more next. This is Bloomberg Quicktake.
This is Bloomberg Crypto. I'm Matt Miller with Kailey Leinz. Now let's get to some of the crypto stories that caught our collective eye this week. The U.S. Labor Department is being called to task in federal court for its recent strongly worded guidance advising for 1 K plans against crypto investments. The lawsuit filed by Plan Provider for us all claims the DOJ is acting as an armchair financial adviser by issuing some regulatory guidance. At least 10 trade organizations representing plan sponsors have been called for guidance to be revoked and U.S. regulators are investigating whether crypto
exchange finance broke securities rules and has to do with the firm's BNP token which is now the world's fifth largest. The FCC wants to know if the initial point offering back in 2017 amounted to the sale of a security that should have been registered with the agency. Finance says it won't comment on talks with regulators and the Winklevoss twins. Gemini Trust is being sued by the CFTC. They claim the company made false and misleading statements about how it would prevent manipulation in Bitcoin prices in the bid to launch the first U.S. regulated Bitcoin futures contract. Gemini has vowed to fight the allegations and that's one of the challenges facing one of the challenges facing the billionaire twins. Bloomberg's Olga Cory
has been tracking these stories joins us now from Portland Oregon. Of course all we reported I think earlier this week or late last week that they're also cutting 10 percent of their workforce the first time they've had big job cuts. Are they facing real problems with the recent drop in the value of Bitcoin. You know a lot of cryptic changes and the crypto businesses are facing problems. Of course Bitcoin is down by more than 50 percent from its all time high in early November. And so
you know. Trading across exchanges is down because a lot of retail investors are staying on the sidelines. So that's prompting job cuts and job freezes across the industry. And you know this the CFTC investigation is another headache for the company. Of course the Winklevoss twins were you know when the first a high profile investors into right. Crypto and tried to
push through you know some new products you know several years ago. And this is kind of stems from that. Yeah. So there's that lawsuit. Okay. OK. Oh gosh. But it seems like there are more and more lawsuits happening in crypto. Why. You know I think a part of it is that crypto is just has become bigger and more high profile. There are more investors invested in it. There are more scams. There are more opportunity just to lose money. And of course also in recent months the price of a lot of coins has collapsed. And that's led to a collapse in wealth of a lot of the investors. And you know that's prompting a lot of this lawsuits as well. All right. Limericks Olga Cory thank you so much for joining us. Matt and I love to read all of your
coverage on crypto. Of course you can find that zero IP go on the terminal as well as elsewhere on the Bloomberg. That's going to wrap it up for Matt night this week. But coming up next week we'll talk the rise of crypto in retail trading with Anthony to near White Label CEO. That's coming up same time same place next Tuesday 1:00 p.m. Eastern Time right here on Bloomberg.