Bloomberg Crypto 03/12/2024

Bloomberg Crypto 03/12/2024

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Live from Bloomberg's world headquarters in New York. I'm not only basic man. I'm Jim Novak. Welcome to Bloomberg Crypto. We'll look at the people transactions

and technology shaping the world of decentralized finance. And Bitcoin hits a record again. The demand for ETFs and the upcoming having driving a surge of inflows into crypto assets and COINSHARES joins the ETF party as it completes its acquisition of Valkyrie's ETF business, including its Bitcoin fund. We talked to the Coinshares CEO in just a moment and more so far, CEO Mike Cagney will join us to discuss his blockchain and lending startup figure as the lending unit heads to a potential IPO and the company works to launch an exchange.

First, though, that's all ahead. But first, a snapshot of the market Bitcoin right now continuing its record run low after reaching a high earlier in the day, down about one half a percentage point just shy of 72,000 Bitcoin, we should note, up about 70% just this year, also up more than 70% this year. Ether, though still not back to its 2021 highs of more than 40 $600 today, just shy of $4,000 at 3991. I do want to check in on shares of MicroStrategy trading at their highest going all the way back 24 years, all the way back to the year 2000.

Of course, that was before the company transitioned into a proxy for Bitcoin. Shares did close higher yesterday by 4%. This after the company came out and said about 12,000 more Bitcoin and its second largest purchase shares higher by 3.5%

right now. And finally, checking in on the iShares Bitcoin ETF Monday, the 41st straight day of inflows into the ETF. That's according to data compiled by Bloomberg. Now, Tim, you talk about BlackRock. I'm going to get started here on grayscale because let's look closer at those flows, particularly for the grayscale Bitcoin trust. Now it has seen more than $11 billion in

outflows since the launch of Bitcoin ETFs. You can see that you've hit those outflows almost every single day. And in total, it's among the second most outflows of 3400 U.S.

listed ETFs so far this year. Yet Gbtc is still the largest Bitcoin ETF out there. Tim. I mean, it does show the power of fees. We should note that Grayscale has filed an S-1 to issue a clone of its Bitcoin trust. It is the largest bitcoin fund in the world.

This has a billions exit the product that new filing we should note is detailed details. The product it would be physically backed by bitcoin and trade under the ticker BTC. Finally again, the ETF. Right now as it stands, fees annually of 1.5%. Now let's bring in Bloomberg's Isabella Lee to explain exactly why Grayscale is doing this is about what does grayscale have to gain by essentially launching a competing product.

So this is standard practice. I wouldn't say standard, but it's not unprecedented to have Invesco and State Street also launching ETFs of their successful once little clones with cheaper fees. So for instance, this gbtc at launch of BTC if listed, the ticker is BTC, which I think is pretty cute and it's aptly named Grayscale Bitcoin mini trust and fees aren't specified yet, but people familiar with the matter said it's definitely going to be lower. And so a lot of the investors you're seeing plowing money into the ETFs are opting for the cheaper funds with 30 basis points. Average fees in grayscale is 150. So that's why we've seen 11 billion, except the fund among many other reasons. In fact, it's ranked the second out of the 3400 listed ETF that's seen the largest outflows so far year to date.

So why not just lower the fee on BTC and bring the fees more in line with competitors? So then perhaps the company doesn't see those outflows friction like for example, if you look at the 250 billion kuku queue that tracked the Nasdaq, a lot of institutional investors are already in it. And remember, Gbtc used to be a trust before it became an ETF. So you just don't want to really like move around so many things. But here's the thing If approved, the existing GBTC holders will be automatic holders of BTC without any of the taxable event. So that's probably the good news. But this remains to be seen. It's going to be exciting if it's

approved because now we're going to have 12 spot Bitcoin ETF after 11 for the longest time. Bloomberg's Isabelle Eby. Thank you so much for keeping an eye on all things grayscale. And while we're in this moment, the Goldilocks moment for all of crypto, Glenn Goodman told us last week that there could be an ugly ending here.

I would say my short term outlook is that perhaps we get another big surge to take us resolutely above that, above that, all time high. But at some point in the not too distant future, I think we're going to see one of them big flash crashes at the very least. Okay. So flash crash, maybe a little volatility. Let's discuss more with Raleigh, Purdue

co-founder and CEO of seven Hour Global. She's predicting Bitcoin to hit $200,000 by the end of the year, if not higher. Raleigh. Good to have you with us today. $200,000 by the end of the year. You know, a few months ago, that would have sounded pretty out of this world.

What do you say are the catalyst that could drive Bitcoin to that level? Well, thank you for having me back. And yes. Last time we were here, our target was 100,000. We are currently revising that to 200 by the end of the year, if not higher.

Indeed, the approvals of the ETFs were a big catalyst, a global event. Not only did this open the door to a wider adoption of the assets here in the US, but also the narrative has shifted globally. I was in about five or six countries in the last month or so and the conversations with investors had changed significantly. We saw yesterday the UK opening the door for the crypto backed ETNs. We had ten issuers filed for a spot Bitcoin ETF in Hong Kong the day after we saw the approvals here in the U.S.. So we still continue to believe that 4050 billion awam in the first year for the ETFs in the U.S.

is beyond the realistic estimate and that demand. Not to mention the demand outside of the U.S. and the having around the corner will be putting a tremendous pressure on the Bitcoin price, which is yet for us to see, in my opinion. Well, that's what I was going to ask you.

Really. How do you know that the having has not really been priced in already? Well, if we look simply at the supply demand, right, we currently have miners providing about 900 bitcoins a day. And in mid April, this number is going to go down to 450 bitcoins a day.

And we're seeing about nine 10,000 bitcoins per day demand. So even people are pricing it in at the moment, I think simply by supply demand will have will definitely see that pressure on price. Hey, Riley, before we let you go, I know you're a little limited on what you can talk about given some regulatory filings that you have pending. But I do want to take a step back and understand the investing thesis at seven Global, because what you're trying to do is launch a product that takes into account carbon offset credits and also Bitcoin.

My question for you is are people willing to sacrifice returns by not investing in their portfolios fully into Bitcoin if they want Bitcoin and also investing in these carbon credits that you're planning to offer? Yes, absolutely. We are a little limit of what we can say. But to our conversations with investors, we definitely see some of them having certain concerns about the energy consumption. And certainly with the having around the corner, we will see even more of that. So, yeah, some impact. Investors definitely look at that as a as a good, good option. Raleigh Perdue of our co-founder and CEO of seven, R-S.C.

Global. Now coming up, Coinshares CEO Jean Marie Magnetic on the ETF inflows and its acquisition of the Valkyrie ETF business and Mike Hackney co-founded So fine. Now his new lending venture hopes to build an interest bearing stablecoin and access all the latest data and news on crypto. Check out, see our wiki Go on the terminal. This is Bloomberg.

Now. Today, Coinshares announced that it has completed its acquisition of Valkyrie's ETF business of $530 million in assets, including the spot Bitcoin ETF. Now let's bring in Coinshares CEO, Jean-Marie Manetti, because there is a lot of consolidation expected in the space. A lot of people are probably looking around and wondering, what does this do for you? Thanks for having me too, Mancinelli. It's great to be back. What it does for us, you know, we started our journey ten years ago launching the first crypto ETP in Europe. We were the first one to launch a crypto Bitcoin spot in Europe.

And then we got ten years later and never get BlackRock and Fidelity kind of doing the same thing in the US. So for us is like to think is a how do we expand our footprint and go and build a global franchise beyond the US and beyond Europe and the US. And then the second point is really how do we start having an addressable market which is much bigger in the US, American ETF market is 15 times bigger than the European. So for us, it's an extraordinary opportunity to keep growing our business, which started ten years ago. How do you compete against the big guys out there? How do you compete against the BlackRock's the Fidelity's, the Grayscale's? I mean, in terms of this ETF that is now in your purview, it's relatively small when you look at the ten other Bitcoin ETFs that are out there. Yeah, you're absolutely right. So first of all, I think the Bitcoin

spot ETF in the US is a game which has been commoditized. You know, COINSHARES is the leader in Europe, are becoming a global player but becoming a global player. We're becoming effectively the fourth biggest asset manager in digital asset, not the first one in Europe anymore because of BlackRock, because of fidelity which and grayscale things are so leadership. And the question is like we are the fourth in the pecking order now, so we become a challenger. For us, it's a place we love to be. We love to be a challenger because that's kind of make our imagination and innovation kind of like come out much more strongly.

And how do we compete is very simple. The way we compete is low by not going up to the same things they're doing. We've been doing with Bitcoin consoles for ten years in Europe. We're not going to do that in the US. The force, the table stake product to have in the US. But if you look at the other products, you know, there is another ETF called WG I for we're going to make it, which is our big great ticker which is a Bitcoin miner ETF. It was a best performing ETF in 2023. It's a fantastic product. And you know, we launched last week a2x

leveraged Bitcoin ETF. So the idea is like this guy, this big guy can do the Akin, the old school product, the one we did ten years ago, and we keep growing today. But in the U.S., we want to bring innovation. I want to bring something different. We want to bring the know how for hedge fund solution business. I would say turbocharging to the distribution of wrapper that the ETF allow you to do in the U.S.. Well, what about other crypto assets?

There's a lot of excitement about the potential Etherium ETF, but a lot of concern that the SCC might stop short of approving one. How do you feel about Etherium, as well as other ETFs in terms of tokens that could make it into the wrapper in the next year or so? I think we need to be intelligent to see that it is indeed the Bitcoin one that I think that if timeline I was seeing some people making promises for May approval, that sounds a little bit, I would say bullish on the narrative. I don't see it happening as quickly as bitcoin. There is an automatic around is it a security, is it not? A security is a staking parameter is creating a lot of questioning within the SEC. So I don't think it's going to be sorted out overnight. We are doing it in Europe.

However, we have the old suite of products in Europe, we have 19 product releases in Europe. So if there was something else, we can listen to us as a singles spot exposure, we will do it very quickly and we'll be equipped to do it. John, I want to go back to this two x levered Bitcoin ETF that recently launched It's all Good when Bitcoin is up 70% in such a short period of time, but we know it's a volatile asset. What happens the next time there's a flash crash or a big decline? How do you protect how do you protect yourself? Well, I we protect ourselves because we have a diversity of product and people can decide which product we're buying and which proves they are buying and selling. We're not doing any advisory role here.

We're just a provider of solution for investment when it comes to diversification, You know, there is a question about, okay, is it time to start creating an inverse product, to start bringing the leverage in the product and all this all the stuff which should allow people to, I would say, invest on the upside narrative, but also invest on the downside narrative. Eventually you're going to end up with like a full suite of product in the crypto universe as ETP, which would be there for making the narrative easier to invest in. ETF vehicle is very, very much like the transformation from A, B to B business model or a B to business model where, you know, we always say it's a retail market in crypto. Well, it was a limited retail market in crypto.

The adoption rate in the US is 12%. So we're still very, very new. And you use things and what you want to see is like how this kind of ETF wrapper. Creating almost this iPod moment, this kind of UI UX experience where all of a sudden you're opening your palm of your Spanish for invisible fun an iPod moment. I like the sound of that. Hey, Jean-Marie, always great to see you. Thanks so much for joining us once again here at Bloomberg Coinshares CEO Jean-Marie Manetti here on Bloomberg Crypto. Coming up, my CAGNY on city state of

Defi and his plans for an interest bearing stablecoin and reminder to head on over to live go on your terminal for a live look at Bloomberg's Caroline Hyde speaking right now with Eli Lilly, CEO at the economic club of new york. We're going to have some of those comments a little bit later this hour on bloomberg. This is Bloomberg Equities in the U.S. are built into the system. It's not about the medicine.

It's more how the system works. So if you have I mean, this is the best health care system in the world. It also be one of the worst. At the same. Now Blockchain Startup Figure Technologies is planning on launching a new exchange, and it's betting it can capture users maybe left behind from FDX. And it calls it the exchange of everything. Mike Cagney is the CEO and co-founder of FIGURE, as well as former CEO of Sofi. He joins us now.

Explain your inclination to start an exchange. Why now and how do you compete with the bigger exchanges? The Coinbase is the finances of the world. Sure. So we started doing activity in blockchain back in 2018. We were the first to originate loans on chain and that year the first to warehouse them did the first securitization in March of 2020 and last year the first triple-A rated securitizations of blockchain assets. And in doing so, we've done about $30

billion of blockchain transactions native to the lending ecosystem that we have. One of the things that's always bothered us about crypto, you know, crypto is necessary for blockchain to work, so you have to have Bitcoin for the Bitcoin network to work. You have to have a Syrian for the Ethereum network to work, but it's predominantly trading in centralized exchanges. So there's a little bit of a paradox there.

And if you look at the finances in the coin bases and up until recently RTX, the logic has always been, well, look, I can't co-mingle Bitcoin and Ethereum. They're on different networks, so just I'm the exchange, give me the coins and then you can trade on the exchange. But when you do that, you're you're basically trusting the exchange. And the whole premise of blockchain is

not to have to trust anything. It's to, you know, truth of or trust. And so we think it's a long time coming for a decentralized custody exchange construct where you don't have exposure to the exchange operator. And so one of the things that we're doing in early April is standing up a true multi multiparty computation wallet structure. So effectively an MPC wallet to support a decentralized exchange initially for crypto. But we're going to bring our lending business or asset backed security business on there.

And ultimately we hope to be able to get public equity on there as well. We think it's a necessary evolution of the market after the bankruptcies that we've had. Well, explain that a little more. Why is this an opportunity for you now, given the fall of FDX? Do customers move over to you? Haven't they already moved over to other exchanges? So I think it's you know, I have a lot of sympathy for the folks that were involved with FDX and Celsius and Voyager and other situations, and unfortunately, they were severely negatively affected by these bankruptcies. But I think there's an opportunity to galvanize the community off of that. And in particular, you know, it's been public that we've been involved in trying to restart the FDX exchange. You know, whether or not that happens at

this point, I think what is likely to happen is for us to do something with the RTX community, so notably to be able to provide a way that they can have ownership in figure markets and participate in that exchange as we build it out, actually provides a mechanism for us to to approach the idea of public equity. Well, speaking of public equity, I certainly understand the opportunity for an exchange for crypto backed assets, securitize assets, public equities. But when you say exchange of everything, do you really mean exchange of everything? Like, are we are we getting to the point? Are you getting to the point where you could see being a competitor, Stock X, for example, and being a marketplace or an exchange for physical goods to that, whether whether it transcends into physical goods, it definitely will impact financial assets. And there's an enormous opportunity for those in particular run cross collateralization. So one of the key growth areas of RTX before it had its problems was equity, Perpetual's and the idea of being able to put up Bitcoin as collateral to trade Tesla. There's a huge appeal to that. And so by delivering cross Collateralization, we think we're opening up a significant opportunity to support not just crypto, not just fixed income but even public equity on a common platform.

Do you think the sting of the burn from FDX is gone? Has it healed at this point enough for a new product to come along to build trust in that same group of users? So I'm very surprised that the centralized exchanges still exist and exist with such market dominance that they have because of what happened with RTX. I think that the industry would realize taking trading cutscene clearing under one roof introduces huge opportunities for risk. And so I think people would like to lead into something that is decentralized custody and be able to be more true to the ethos of blockchain, which is, again, trust, not truth. Let's do a little bit of a thought exercise here, because one question I've been asking is if you are trying to build a new exchange and other exchanges are also coming to the surface even more, the idea of Defi becoming more prominent exchanges that are not the typical Nasdaq or New York Stock Exchange.

What is the point of an ETF? The people who are buying into Bitcoin ETFs today five, ten, 20 years down the road, would they find themselves disappointed? I don't know. They're going to find themselves disappointed. I mean, obviously Bitcoin's been on a torrential rally, took a little bit of a breather today despite the inflation print that we got. I think the benefit of the ETF is you have a are in the ETFs through the creation and destruction of units and that is a significant benefit to investors. But but it is worth talking. No to the thesis of blockchain, Right? The idea that we're going even more centralized on the structure versus the idea of a decentralized play.

And I think, you know, we're working with partners, you know, significant market market leaders like jump crypto, for example, and creating very deep liquid to a markets, bringing the best technology into the marketplace. And it provides a foundation to do something very disruptive. And that disruption, a lot of times people say, oh, you're going to get rid of DTCC or Deposit Trust Corporation. Sure, you don't need a centralized registry with blockchain and say, Oh, we're going to get rid of the NASDAQ or the NyQuil. You don't necessarily need those centralized exchanges with blockchain. But the big disruption is you don't need the introducing broker, you don't need the Schwab's or the Robinhood's or the TD's because you just attach your wallet to the exchange and trade.

That level of disruption makes a lot of people nervous. That's why you have a lot of resistance to what's happening. But it's going to happen. Well, it's interesting.

The Nasdaq or New York Stock Exchange are looking at kind of quasi regulatory bodies here. How does what you're building fit into the existing regulatory regime in the United States? Sure. So one of the benefits that we have is we have an alternative trading system that is very unique in that it allows us to trade blockchain native securities that can bilaterally sell, settle.

And so it's the only ETFs I know of that can do this effectively consistent with this whole blockchain ethos of, of and supporting decentralization. So the objective with using blockchain isn't to circumvent regulation, it's to adhere within regulation. But, you know, I think there's a framework there that we can bring some significant innovation even under the purview of the SEC. 30 seconds here, Mike IPO for the

lending business. How soon can we see it? So we are very content with the progress in our lending business. Obviously, I can't talk anything about the IPO per se, but you know, fingers doing very well. Mike, we appreciate your time.

That is Mike Cagney, the CEO of Vigor. That's all from Bloomberg Crypto today. Join us same time, same place in place next week, ten. Let's see if we hit another record. Let's see, up 70% so far this year.

Three of like, you know, three consecutive records in a row for Bitcoin trades, 24 seven. So nothing would surprise me at this. Think surprise you? Well, we're going to take a quick look at the markets here before we let you go here. We also are looking at not just crypto riding higher here. We're also looking at the stocks, also the stock market moving higher as well. We have the S&P 500 still up 7/10 of 1% on the day. We also have the Nasdaq 100 up on the day as well.

We have seen yields fly higher today on the back of that CPI data this morning, but it is not putting a dent in the exuberance we are still seeing out there, still a strong bid. And yeah, a little surprising to see the equity market move higher off that hotter than expected CPI print that we got. Perhaps it wasn't as hot as some people expected it would be, even though it did come in hotter than analysts expected.

We did see the initial reaction with equities move lower finally. But look, that exuberance still in the market today. And it's interesting, too, just as we've been talking, you have seen bitcoin actually take a 2% dip lower here, still above 70,000. So nothing to write home about, but still below that $72,000 level.

Thank you for joining, Tim. You will see you next week. See you next week. That does it for us. This is Bloomberg.

2024-03-14 07:00

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