Bloomberg Crypto 07/25/2023

Bloomberg Crypto 07/25/2023

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Live from bloomberg's world headquarters in New York. I'm Sonali Basak in for Matt Miller. And from our studios in Washington, DC, I'm Kailey Leinz. Welcome to Bloomberg crypto. A look at the people, transactions and technology shaping the world of decentralized finance. Coming up, house Republicans are unveiling a new bill for crypto oversight.

We're going to discuss that more with House Financial Services Committee member Congressman Frank Lucas. And navigating through shifting market structure amid regulatory uncertainty. We'll speak to the Winter Mood founder and CEO Evgeny Galloway. Plus, open air CEO Sam Altman's crypto project, World Coin makes the official debut. Investors are piling into the projects token amid the hype around artificial intelligence. All right, so there's hype there and all

of that is ahead. But first, let's talk about where there isn't that much hype in crypto markets and take a snapshot of them. You can see this on see our wiki go on your Bloomberg terminal.

And what you will find is it is a relatively quiet day. Bitcoin and ether are only up by about 3/10 of 1% respectively. Bitcoin right now trading at $29,227. And then XRP of course, the token that was front and center in recent weeks after that ruling between Ripple and the SCC, it seems like some of that hype is fading a bit.

XRP is down by about half of 1% today. The one Outperformer I wanted to point out finally is Dogecoin outperforming for a second day, up 6.3% or so today. This is all on the idea that it perhaps is going to get integrated into ex Elon Musk's rebranded Twitter in regard to that payments that it is expecting to include. So that's where some of that is coming from. And Dogecoin certainly benefiting from that. As we've often seen, Elon Musk has the

power to move that token really. He certainly does a lot on Dogecoin in the last year or so, but I have more on how the hype has been cooling over the past year or so. Just take a look at this. Collate It is the movement into exchange traded products for crypto.

Here you have had about a half a billion dollars flow into the industry over the last several months, but this has been at the pace of hundreds of millions over the last couple of weeks. That has cooled down in the last week to just over $1.6 million. So a drastic change in the flows in still positive, but certainly that hype over there is cooling.

Okay, So maybe a little bit of fading optimism, but it does still seem personally like crypto investors are the most optimistic. They've been in over a year about the odds of the world's biggest Bitcoin investment product being allowed to be turned into an ETF. Grayscale CEO Michael Sonnenshein spoke to Bloomberg about the decision. Gbtc is a product that's actionable for investors today.

It has a ten year track record. It's the largest Bitcoin fund in the world and an operational track record of success at that. And so you contrast that with a lot of the other filings out there, which are merely just proposal is hoping to come to market. But regardless, we are prepared for a world in which there are multiple products. We should expect a decision by the fall at the latest from the D.C. Circuit. The decision could come out of the court any day.

Joining us now is Bloomberg's Katie Greifeld, who had that conversation with Michael. So, Katie, when he says any day, realistically, when do the expect we expect this and what happens next? Well, you heard it from Michael time himself by the fall for Bloomberg Intelligence specifically. They're expecting by the end of September. But like Michael Sonenshine said, it could come any day that we're expecting a decision from the D.C. court. They tend to post their decisions around 11 a.m. on Tuesdays and Fridays.

So a lot of people have been refreshing that page. But given that we had oral arguments all the way back in March, it makes sense that sometime in the fall we should finally get a decision on what's been a huge story to follow, both for the crypto industry and the exchange traded fund industry. Do you think that the investor base around GBTC is very bullish on Gbtc, especially given that they're going to face competition here? You're seeing the gap narrow when it comes to their discount here. Except for it's still come down a bit over the last couple of weeks or so. Is there a chance that BlackRock just wins out here? So that's where this conversation gets really interesting. Just in the past month and a half, of course, BlackRock coming out with that spot, Bitcoin ETF filing.

Who knows when that will be approved. The absolute maximum for the FCC to make a decision on that is 240 days. You could enter into a scenario where some of these spot products start to launch. And this case between grayscale and the SCC hasn't been resolved yet. So that's one of the many storylines that we're following here. But really for most of its existence, Gbtc has really enjoyed the fact that it's one of the only products out there and a fund like structure.

It's a trust, it's an exchange traded fund. But now you're entering a scenario where if BlackRock and some of these other heavyweights who have come forward, I'm thinking Invesco too, if they come out with spot Bitcoin ETFs and who knows what they'll be priced at. That's obviously a lot of competition. All right. Well, Bloomberg's Katie Greifeld will continue to wait for that ruling.

Thank you very much. And while we wait for clarity from the court's Republicans in the House of Representatives are attempting to provide regulatory clarity for crypto markets through legislation, the House Financial Services Committee will be marking up the financial innovation and technology for the 21st Century Act tomorrow. It's a market structure bill that looks to delineate authority between the CFTC and the SEC. It's a joint effort between the Financial Services and Agriculture Committees, and I'm pleased to say that joining us now is a member of both of those, Republican Congressman Frank Lucas of Oklahoma. Congressman, thank you very much for your time today. Let's begin with the markup in financial services tomorrow. First, will this bill find your support

in that committee? And do you think it has enough support among your colleagues? Well, first off, I suspect we'll go through an extensive amendment process tomorrow and financial services were successful there. The bill will pass out. We'll go through a similar process in the Agriculture Committee because it's a split jurisdiction. But, yes, I believe it's time to bring some certainty to this process. I will give Chairman McHenry of the Financial Services Committee and Chairman Thompson of the AG can be high marks for working really hard to get us to this point. The number of hearings, the number of briefings, the number of roundtables, the number of stakeholders we've listened to is really quite incredible. But this is a complex bill and we'll see how comfortable the members are.

Will it passed unanimously? Probably not. Will the Republicans overwhelmingly support it? I believe so. Will Democrats. I think so. Do we have wild cards on both sides of the room in the hours and days? Absolutely. That's the nature of this complicated session of Congress. Yeah, well, this is Washington in 2023. Congressman, what are you hearing,

though, from your Democratic colleagues on this matter? I think they're generally supportive. There is some hesitation. You have to understand that a lot of it depends on your philosophical perspective. Most of my conservative colleagues, without regard to party affiliation, view this potentially as where financial transactions go, view this as a legitimate effort that it's been evolving and it needs to have certainty and regulation to move forward. Some of my more liberal colleagues, I think, are a little hesitant about creating parallel ways to move resources because they would like the government and the traditional payment system to control everything.

But we'll work our way through that tomorrow. But also remember, this will be a committee markup in Financial services and AG this week. We will still have to go to the floor. The Senate will still need to do something.

We'll still wind up with a conference committee report or a final version of a bill that then goes to the president's desk. So we've come a long ways. But this is just the first step to get to the end. Congressman, what is the Democratic

compromise here, knowing that there are a large group of Democrats that don't necessarily agree with the bill as it stands today? I don't know that I can answer that question. There. A handful who just philosophically don't believe that resources should be able to pass through sources outside of the government. If you want to tax everything, if you want to regulate everything, then you want to keep it close to where Uncle Sam can the Federal Reserve System and Treasury can keep a grip. If you believe that resources should move or the economy and the markets dictate, which tends to be more of my, I suppose, my conservative Republican colleagues than you're generally supportive of this.

But the markets, the consumer reaction has been so far, we want to do this now, regulation and regulatory certainty competing in the international financial world and safety for people making these investments, using these avenues. That's critically important that this bill is all about. What does this mean for the control that the CFTC has over the crypto industry vis a vis what the FCC will be overseeing moving forward under the new constructs of the law? Well, I've been a part of both committees from both committees for almost three decades. There's different perspectives of from how the Commodity Futures Trading Commission functions from the FCC. The Commodity Futures Trading Commission is proactive. The FCC is reactive.

FCC tends to be, at least under its present leadership, more control oriented generally about everything. Bottom line is this The fact that the two chairmen are working so methodically together says that there is a way to achieve a consensus now still have to have the Senate and we still have to have some other folks participate with us. But we can't continue in the Wild West format we're working in right now. Our international competitors will lead us alive and we'll continue to have circumstances where, you know, sometimes $1,000,000,000 at a time seems to disappear. That's unacceptable in the format we're working in now. Congressman, you alluded there to SEC Chair Gary Gensler, who obviously was dealt a bit of a blow in court recently in regard to the Ripple case and whether XRP was indeed a token.

The court ruling that it is not when sold to retail investors. Do you think court decisions like that build momentum in Congress toward making this delineation, deciding what the FCC ultimately has authority over? It is stressing the urgency for Congress to react. The courts, depending on which court it is, depending on which judge it is, depending on the nature of the case put together, you get a variety of results that's not just in these issues, but all issues. It reinforces the fact we need to provide some certainty. We'll see if we're capable of starting that process this week.

Again, I give my full committee Chairman McHenry and G.T. Thompson much credit for getting us to this point, but it's a big boulder. We're pushing up a tall economic and political hill. And Congressman, final question for you. Just given your role on the Agriculture

Committee, the AG appropriations bill now seems to be the subject of debate over culture wars. There is also several concern, conservative colleagues, that you have that are pushing for reductions in SNAP benefits. Congressman, what is your take on all of that? The House of Representatives is a very intense body. The Republican conference is a very

intense group of conservatives. We're going to have challenges in every piece of legislation that goes across the floor. We saw this in Indiana. We're now going to see this in the approach process. We'll see it in the farm bill.

Remember, the House passes language, The Senate takes action. We have to reconcile the differences in a conference committee report. Conference committee reports require a majority of the House and the Senate, a majority of the overall bodies. The final product may not look like everything that originally the House or the Senate, but that's okay.

It's called legislating. Indeed it is. Well, Congressman Frank Lucas, thank you very much for joining us with your take on some of this legislation. Good luck in tomorrow's markup. We appreciate your time. Now, coming up, we will be speaking to

the CEO of Winter Mood on how his firm is working to protect investors. That's next. This is Bloomberg. As we thought about being an operator of a custodian solution and being a custodian in the US market, we also do like to be able to operate in a pretty well, well regulated environment and in a well understood regulatory framework. And right now that regulatory frameworks changing. So we decided to halt those efforts right now and really just focusing on the tech business and on the listings. So that was NASDAQ CEO Adena Friedman speaking to Bloomberg after halting the operator's plan to launch a crypto custodian business in the United States.

Now, while some might be pulling out of the crypto space, the crypto algorithmic trading firm Wintemute is optimistic. Now they're seeing volumes move from exchanges to over the counter. When Amit, founder and CEO of Kenny Guy Boy, joins us now. Evgeny, thank you so much for joining

us. Because the question I have under the surface here is what does it really mean for more activity moving off exchange? Yeah, I think first of all, thanks for having me. I think part of it is basically there's a reaction to the last year of events, of collapse, of attacks, general, like people not being super excited about the store and the assets on exchanges as well as basically centralized exchanges. And so people are looking for the basically to deal on the RTS side of things where markets are potentially well affected, protected by connected to custodians, by connected to by ground, to believe familiar setups, because I'm like prime broker, for example. And I think that's basically what drives that. I'm curious what this means for trading, especially when it comes to trading, not just the core products, but derivative products here.

How do you know that your money is safe when there are so many big questions around custody and so many big questions about how the derivative market has been growing around the crypto industry? Yeah, I think it's all about basically trusting the custodian. And I think that the biggest topic of custody also because it's not the news was quite interesting in that regard. This topic of custody will be a pretty big one over the next years.

Like it's not just this year and next year, but for the next ten years, even for crypto, because it's one of the key things to figure out and it's basically one of the key aspects of basically how a house blockchain would work. But back to derivatives, one nice thing about derivatives says that the cash settled so you don't need to necessarily is sold a custody part because it can just deal with in Stablecoins $7 and that basically solves a lot of pain points currently for anyone who wants to get exposure to various crypto assets. Evgeny We were just speaking with Congressman Frank Lucas about the efforts underway in the US Congress to create some regulatory clarity for digital asset markets.

Delineate what the FCC and CFTC each have authority over. In the absence of that regulatory clarity here in the US, how hindered is the industry? I think the general trends that we see, that's a lot of protocols, a lot of exchanges are just being on a very careful safe side by simply closing down completely at the U.S. at the moment. So like we know protocols for the exchanges that they've just been completely closed off.

And I think this trend will continue until we get this for greater clarity. And what you'll end up with for U.S. investors, for example, is they will definitely be sidelined from like whatever new, exciting things happens in crypto. Give us a picture of what it looks like

under the surface here. Is there a question of liquidity being robust enough given the amount of players that have stepped out as they're awaiting regulatory clarity? That's an interesting question. On the one hand, we see we definitely see in number of us based competitors of ours pulling out of crypto markets completely.

On the other hand, I can also see that, for example, European prop train firms are scaling up. We see increased competition from outside. Asian proper firms are still around as well. So it's it's kind of like shifting competition, which is natural as I think it's like for us, it doesn't really change in us in terms of who got them for the market as a whole.

Liquidity might be less on centralized exchanges, but for example, to see competition as is pretty significant. How much money is actually moving offshore based on what you're seeing today? Yeah, that'd be pretty tough to estimate that, kind of separate from general bear market volume drop. But yeah, my my guess would be I mean, if you if you simply look at Binance volumes, for example, there are no significant double digit percentages somewhere like multiples of their rivals and in gas, for example. So that's one. One interesting one to look at. That's a skinny guy boy founder and CEO of Min Winter Moot.

Thank you so much for your time. And coming up next, World COIN saw a strong trading debut on Monday, but the eyeball scanning crypto project is not available to trade in the United States. More on that next. This is Bloomberg. This is bloomberg crypto on Kailey Leinz in washington with Sonali Basak in new york. Well, bitcoin today is floating back above that $29,000 mark. But there's something else that's grabbing more attention. The weekend box office hit Barbie.

It's been getting more media coverage on the Bloomberg terminal than Bitcoin has in the past five days. Just ahead of the toymaker Mattel earnings on Wednesday, we have a great chart that shows that coverage on the Bloomberg terminal. I personally have my tickets to go see Barbie tomorrow, so I will be buying into all of that hype.

But there is something that has outshone shine Bitcoin this week. In addition to Barbie, it's the crypto project co-founded by Sam Altman. It officially launched on Monday after surviving through three tumultuous years in the industry. The CEO of Openai said in a statement that World COIN is an attempt at global scale alignment.

The journey will be challenging and the outcome is uncertain. Well, joining us now to talk more about that is Bloomberg's Joe Weisenthal. So, Joe, this is an eyeball scanning project. It creates a digital identity proof of personhood, the company says.

But is this basically just the ultimate hype sandwich? Crypto and AI smash together? I mean, it kind of is. I'm going to be so fascinated by this company for years since it launched because the idea that we're all going to get this like big orb and they have this multi pound orb and I've held it and it's going to scan your eyeball and it's going to create a unique form of identity and you're going to get a universal basic income through that identity. And it's related to crypto and as well, it's like so like everything as you said, this sort of like maybe like a hype sandwich.

But on the other hand, when you think about and you think about the various risks, whether it's sort of disruption to jobs or the idea that I could say impersonate a person or impersonate a loved one, etc., are you really the person that you claimed you are? It's kind of like a very interesting, ambitious problem that they've tackled. So even as weird as it sounds and everything, like, I'm kind of just like absolutely fascinating just because speaking of the risks here, what are the security risks of the eyeball scanning that is happening here and and tying it to, you know, your economic future? I mean, are there real concerns? Yeah, the project absolute.

I mean, is the scanning your eyeball? I mean, obviously there have been some criticisms about privacy and whether there is a database. They claim that there will be none, that all of the logic is not in some centralized database, like, say, the Social Security Administration, which has a database of everyone's Social Security number, that it's this unique hash that all the logic is more or less hackable, the Social Security. And they say in the world, right? Yeah, they say no. And, you know, and you know that they have like 13 ways of scanning your eyeballs. So like, they can tell maybe if you're like under duress, if someone's like, put your face in front of one of these scans or something. But it's a pretty sci fi stuff and I

don't think anyone really knows like where it's ultimately going to go. It's just like, so weird and fascinating. Yeah, And that's like that technology itself.

But then there also is the token that had a phenomenal debut yesterday, Joe, but it's worth noting you can't treat it in the US. It's just another example of the regulatory environment here, limiting what people can do. Yeah, I mean, there's regulatory element. I mean, and there's also the question of like why do we need a token associated with it feels very like 2021 or 2020. You know, their argument would be that if you're going to have this sort of system of identity that control that everyone is one day going to depend on in order to prove their human would collect their UBI because the AI put us out of a job, etc., then it has to be distributed and distributed governance. And it can't just be controlled by one company that is connected to Sam Altman, etc.. So of course, one the argument that they

would make is that, well, this is what crypto is good for, distributed governance, etc. On the other hand, people look at this coin and they say, Oh, there's like really low flow. And it's just a classic thing where because there's so much hype and because there are so few coins out there, it shoots to the moon.

And it's unfortunate already. So it's sort of like, okay, look, I can accept the crypto logic, but also the reality is like it is what it is that's huge. Like, you know, there's a massive like punk for something that like has not borne out what it said it's going to do.

All right. Bloomberg's Joe Weisenthal always great to get your hot take. Thank you so much for joining us. That wraps it up for us on this Tuesday. But make sure to tune in next week. We'll be talking to Gary de Waal, senior counsel at Catan. He'll be joining us then 1 p.m. Eastern time on Bloomberg TV. This is Bloomberg.

2023-07-28 17:05

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