Bloomberg Crypto Full Show (04/19/2022)
Live from Bloomberg's world headquarters in midtown Manhattan and streaming on Twitter I'm Matt Miller. And I'm Katie Lyons. Welcome to Bloomberg Crypto. A look at the people transactions and technology shaping the world of decentralized finance. Coming up the world according to Sam Banks and Free. The billionaire CEO of FTSE X on how to build a crypto fortune and
then give it all away. And from one 30 year old crypto titan to another we're tracking the rise of bitcoins most watched whale. Plus we're gonna speak with Jamie Lever 10 the CEO of Canadian Bitcoin miner Hot eh. She'll talk strategy as costs rise and prices swing. All of that is ahead. But first let's get a snapshot of the market in a way the way some individual tokens are moving in today's trade. No surprise given the broader risk on sentiment. You're seeing a lot of that most of them in the green including Bitcoin up about
one point seven percent were north of 41000. Yet again although we still remain in the range we've been in really for the duration of twenty. Thus far we are seeing some outperformance when it comes to either up about 3 percent. We're trading in and around thirty one hundred Ripoll up about 2 percent as well. I wanted to point to Monaro though Matt because this was a really interesting story of yesterday. While most other coins were down this all the coin in particular which focuses on privacy was actually up about six and a half percent. A coordinated move for some holders of this token to withdraw from exchanges is
basically a coordinated attempt at a short squeeze. That drove it up pretty far yesterday but it's actually underperforming today only up about eight tenths of 1 percent trading right around to fifty five. All right. Very important to watch those coordination and correlations. This chart that I have is really interesting because about 10 years ago I asked my assistant treasury secretary if he thought bitcoin was a commodity or a currency. He said commodity. I'm looking at correlations between
crypto currencies and the commodities index. And we can see that it's actually at the lowest level that it has been in recent years. So right now Bitcoin is really trading at a high correlation more with tech stocks and the Nasdaq 100. The crypto community remains undeterred keeping its faith in the resilience in the space. The eco system that's being built around crypto incredible growth in this whole sector nothing short of amazing
so much momentum happening right now. Adoption is huge investment capital and growth capital a focus on real use cases and real adoption continue to drive the incredible growth in adoption the evolution of the protocols. Tremendous progress in the regulatory environment. It's a great moment for Bitcoin. The crypto economy is quite resilient from bitcoin bowls to bitcoins most watched. Well today's Big Take story takes a closer look at one of the most influential and the
most controversial figures in crypto. Sonali Basak has the story. Really. Billions of dollars at play here Matt. We're going to talk about Dough Quan who went from being a little known startup founder of TerraForm Labs which powers the Terra BLOCK chain to one of the biggest whales in Bitcoin. This year a group that was led by KRON bot over one point five billion dollars in Bitcoin. And there's a pledge to purchase as much as 10 billion dollars worth of the token to help prop up the terror block chain and its stable coin. Now Klein's big moves have really polarized the world of crypto. And on one side you've got legions of fans and deep pocketed crypto backers like Coin Beth Space Ventures. Galaxy Digital. Mike Novogratz and Pantera Capital. And these so-called lunatics. A nod to the Luna Token. Remember Mike Novogratz and South has that Luna tattoo. They're
working towards the ultimate goal of creating a digital cache that can bypass banks payment processors and all of their fees and regulations. But let's look at the other side because there are critics who say that Doe Quan is doomed to fail and some launch accusations of a Ponzi scheme. Others are warning and without much evidence. As of this point that the risks can bring down the entire world of digital assets that it could bring down the whole world. That's a big deal right. Because this is not just saying that the risks could bring down Terra or Luna but it could bring down all digital assets. And that's the worry. I think in general around stable coins. Right. That it's more of
a systemic risk than anything else. But I think it speaks really to the polarization in this market as a whole where you have some people. So for it so bullish on the complete other end of the spectrum some people who don't believe it believe in it at all. What I love about this story is just the color that it shows as well in addition to the tattoos. Like Mike Novogratz
had Quan has a newborn daughter. She's named Luna collapse. It's interesting the lengths to which these people go to their dedication. And Sonali. I also think it's interesting that you know this is about an interesting and delicate dance because on the one hand you're trying to create a cryptocurrency that is not beholden to any government that doesn't allow for any kind of censorship. On the other hand those who are pushing for regulation probably do want to stick their necks out that far when we're in the middle of the Russian war in Ukraine in any case. We'll talk more about that a little bit later. I'll ask Sam Beckman freed what he thinks about the lunatics. He joins us
later on in the program as well as the CEO of Hot 8 Jamie Lever 10. Plus Yvonne Man weighs in on whether he thinks E.T. apps are the way to play the new era of investing and to access all the latest data and news on crypto in general. Check out see our WIP go on the terminal. This is Bloomberg. This is Bloomberg Crypto I'm Matt Miller with Kailey Leinz. Joining us now is Sam Backman freed founder and CEO of FTSE.
Sam was profiled in a recent big take on how he plans to give away his fortune. And it was a fascinating story. Sam I have to first ask are you playing a videogame right now. I'm not going to comment on that one. I'm taking it. All right. Well that's that's cool. I'm actually configuring a truck as we speak. But I wanted to hear your views on this Luna debate because I think it's so fascinating that there's a community that wants to bring crypto almost back to its roots. Right. You want to have an uncensored untouchable by government coin currency so that one person can just turn off another person's money for whatever arbitrary reason. Are you in the camp that's for it or against it. So I mean I think that there are a lot of interesting things going on there I think one of them I know always to keep in mind when you think about governmental control over ISE there's a lot of governments in the world. This question looks different
depending on where you're approaching it from. And certainly everyone has their own thoughts about about which you know which which government is or which there. I think one of you know you can look at sort of like you know USA here they like stable going on on Luna which I think is a cool idea. It's you know fundamentally when you ultimately look at the controls in place you still have controls on the cashing in and the cashing out in the same way that you do with any other crypto currency. And frankly you also still have you know with us. He interestingly I know you still have all the exchange AML KYC controls. So in many ways I actually think for me you know ultimately from an AML KYC perspective there are a lot of similarities between it and on you and other crypto currencies. I think one of the interesting parts when you look at an algorithmic stable point
which is what USC is right is you know the fee is is the question of the stability of the backing and the decentralization of them. And I think there's lots of interesting important implications for market stability. We actually have a viewer who writes in Sam with a question asking if you think the market hasn't fully priced in the possibility of a stable coin like tether failing. It's an interesting question and I think that the. It all comes down to the details here. I think like worrying about a stable point failing is a really important thing for the markets because it's really bad. If a stable plane fails it undermines a lot of trust in the system as it turns out. Right now I think
that the major USD back stable points including Tether are very unlikely to fail. I think that as it turns out right now. You know I. We've seen them go through pretty extreme periods and they are all generally backed by I don't want to make claims that they're backed off perfectly or perfectly transparent around it. I think they're much more back than they are UNbacked. And so from some perspectives I think things are in an okay state. But I you know that need not be true going forward necessarily. This is going to be an ongoing concern. And that's one of the reasons that it would make of have mandated audits of
stable points. Yeah. And we know that stable points have gotten a lot of attention from regulators. And on the subject of regulation Sam you have been pushing for the CFTC to have a greater role a greater hand in that. Can you just shed some light for us on what exactly the proposals you were discussing with the CFTC are what you're hoping to accomplish and whether that will go beyond crypto into other asset classes like equities commodities trading. So for now just talking about about crypto on that perspective I think there are really interesting questions on other topics. I think that we're not particularly close to being ready to address some of those. But I think that like on the crypto side what are the core pieces of
it. You know the CFTC is already the regulator for Bitcoin futures for 3M Futures. You know visualize the commodity futures contract the same way it is you know further commodity futures contracts on one piece of what we've been looking at has been basically you know I the sort of market structure that you see with cryptocurrency exchanges they have some differences from what you see with traditional commodities venues and the biggest ones there. First of all is that the collateral for a future position on RTX International today is held with FTSE. So if you want to put on a Bitcoin futures position the first thing you have to do is deposit funds to FTSE as collateral. The clearinghouse holds all that collateral and has real time 24/7
monitoring of it and leveraging it position start going under. The traditional setup for other commodities platforms in general is instead that there is a series of intermediaries that hold that collateral and I or at least have agreements around that collateral. It's not always clear if they necessarily hold all of that collateral. And it's not transparent to most people what's going on there. And you saw this playing out with the LME nickel contracts where you know by the time they'd had time to
dive into what had happened. In fact someone was like eight billion dollars under water. And everyone else you know looks like they might get stuck bailing them out. All right. Well Sam obviously whatever regulation is put into place won't just affect FTSE. How could your plans change the way that more traditional Wall Street firms operate and drain. No I mean one of the big things is I think that that may provide a pathway for them to get involved in digital assets that that's frankly something I'm excited about here. You know I think a lot of them have been waiting for you know clear federal oversight of this space to get involved. I think that there are really interesting applications other asset classes. Now just be
careful when you do that because you have to look at what the existing settlement cycles look like in your traditional agricultural commodities. How would that interface with a system like this. I think it's an interesting question. I think it's one that needs more thought. And certainly you know we would be looking to start just with doing this for digital assets. But but I do think that that would be really interesting to do a deep dive you know with the CFTC and crucially with the core market participants in those areas about how this could you interface with that. I think when you look at things like treasuries. Right. I think token ISE treasuries could be really interesting. I think you could provide transparency and real time settlement of them getting rid of these sort of like he's your. Want teach your system that we have for various asset classes. Right. With securities where it takes two days to settle a trade and there sort of like some amount of uncertainty
and risk and exposure during those two days. I think it would be really cool to see you know real time margin in real time risk and real time settlement you know based on tokens of those. So I think there are really interesting applications to a pretty wide variety of Sonali Basak finger would be a big problem in that case. Right Sam. I mean so many people have learned the hard
way. What's the cash transfer service. Zell has been really useful for scammers in stealing money from people that can never get it back. Yeah it's interesting. No the truth is that there is exposures in both cases. And if you asked like what type of fraud this FTSE users attempting to perpetrate the most like what is the most frequent fraudulent attempt on RTX. It's not using crypto currencies. By far the most common is using credit cards and CCH transfers. And the reason is just typical chargeback. It takes months for those to fully settle. And so you see people coming in and
buying assets with them and then attempting to cancel the payment after having already bought something with it and certainly not returning the other side of it. Right. This is a huge problem that lots of businesses face and it's a nightmare to try and resolve and and it's a consequence of the vote largely delayed settlement that we as a platform have to choose between. Do we wait a month to credit people their funds like that would be ridiculous. But of course because we don't do that we have to try and figure out who is a fraudulent user and who is not which is not an easy question either. OK Sam I want
to pivot to another story we've been carefully following at Bloomberg for the last couple of weeks and I know you've been following it too. Elon Musk's bid for Twitter. We just had a headline crossing from The New York Post that he's willing to invest 10 to 15 billion dollars of his own cash for Twitter. Whether or not he eventually succeeds. You have proposed a decentralized model for Twitter. Can you just walk us through that and how you think it will be beneficial to the company. Absolutely. I think this would be a really really interesting and important innovation in in you know social networks. Obviously we'd have to see how it actually played out. But here's the core of it.
Right now one of the big problems with social media is there's lots of platforms and all the platforms are completely independent of each other. There's no ability to see a tweet on Facebook. If you message them on Facebook you even WhatsApp can't read it in that. That's even the same company. And so it's you know really messy system where there are you know there's no interoperability between different platforms. And there's a second problem that you have here is around. I basically
moderation. Right. Like what is the moderation policy for basically all of social media brands like three guys. Right. It's a people who run three companies which choose what does and doesn't get censored. And we've seen that that is a broken model. Right. We saw social media choose not to censor misinformation in 2016 and get absolutely roasted for that decision. And then we saw them choose to censor in 2020 and get roasted for that decision. And and so here's the core of what I
think would be really really exciting would be that you take a blocking you put the actual underlying messages directly on the chain. And what that means is that any platform in theory could access those same sets of messages. And so whether you're using Facebook Twitter or whatever this sort of like you know platform is they're all drawing on all of the messages they can. All right. Through this blocking they can't read from it what they are as different interfaces effectively living in the same universe. And one of the cool things that falls out of that is first all you have interoperability between platforms which solves a lot of these network problems and allows for more competition to meet new people can enter the space without being miles behind in terms of you know user base growth. But the other thing that it means is that when it comes to moderation
you can have different platforms making different decisions. Right. And so you could have you know two people have two different platforms each with the same underlying set of messages accessible unto you know they don't have to deal with this network effect problem. But which makes slightly different decisions about what to censor what not to censor. And I you know and that can at least give some consumer choice here. Can at least give people you know options. Sam I think it's a
fascinating idea. And I also had seen Sisi tweet about it on the Elon Musk Twitter announcement day. I'm just wondering have you talked to Ilan about this. I have not talked directly to do you on about this but I would be excited too. I have had some conversations with young people who are investigating this. I think there are really cool ideas and I would be really excited to be potentially involved in something here whether you're looking at Vicky. I think that the biggest thing would be thinking about how blocking could be applied here
on you know maybe as a test case for its IBEX to help on designing and building up it. And I you know on I you know potentially helping to manage a network that was looking to do this. All right. Well maybe we can facilitate that conversation. I want to facilitate another one right now and bring Jamie Leverkusen into the conversation. She is the CEO of Hot 8 Mining. Jamie I was going to ask Sam and I also want to ask you there's so much talk about the
possibility of a crypto winter a multi year crypto winter. Are you worried about that. I think the possibility is remote just based on the continued acceleration we're seeing of adoption skeptics now but kind of becoming proponents the backdrop of the inflationary environment. I personally don't see it. That said I run a publicly traded Bitcoin mining company. And so we need to prepare for all cycles. And one of the things that we've done to do that is to build a more diversified strategy. Well to your point I'm being publicly traded. The miners in particular Hot 8 being one of them have had a pretty rough go of it so far this year. There's a lot of concern out there about margin pressures in particular because you need energy in order to mine. And yet energy costs have been surging.
How worried are you about your margins and surging costs in order to do what you do. Yeah I mean we're one of the lucky ones in that we've been around. This is our third cycles. We were born in a bull market. We survived a bear market. We've been we were thriving in this most recent market. We'll decide what it ends up being. And so for us we've got we've already have scaled operations. We work well with our local communities. We're building a third site that actually gives us a fixed rate of powers is what reduces our exposure there. One thing people don't often know about mining equipment is you can dial up how
much power it uses in the and the output. So. So there is some protection boats in from the hardware directly but we're still margins. I'm not sure if these are our last quarterly financials. Margins continue to be very strong and we don't see pressure for a fully scaled business coming in the short term. Although for the smaller miners in the space that may have paid peak market prices for the hardware last year that might not have that kind of built out scale. They could definitely be under pressure sooner rather than later if this continues. Really interesting. And Sam I want to bring you back in as well. If you've been listening to Matt's point on the crypto winter a lot of the action we have seen in high risk
assets cryptocurrency currencies being among them has been driven in part by abundant liquidity. That is now an environment that's changing. Fiscal stimulus is no longer what it once was a few years ago. And I'm wondering how you are expecting that to influence volumes on RTX in particular. So I mean look it's going to happen right. Like it's clearly
going to impact the business. And you know you've already seen a market. I mean we've you know generally been growing in market share. But you've seen in market wide decline in volumes to some extent you know driven in in large part by monetary policy and and by you know expectations of future inflation effectively. That all being said I think something that's important to keep in mind here you know is that this is this is a pretty different situation than what we were looking at in 2018 2019. Right. If in 2018 you had a massive shock to the system that would have been way worse because it was a way less developed ecosystem. There's way less capital backing it. There's way less institutional buying. And that just like
increased the risk from a lot of perspectives. And so I think that you know it is in a much more stable general position today than it was in a few years ago which is going to help backstop it. The other thing I'll say on the monetary policy side I do think it's very important but it's also worth remembering that you know in theory in an efficient market you see the impact of that all front loaded. Right. It's not like every time that there is a rate hike you expect to see a massive market change because of that. In theory markets should already have the anticipated future rate hikes and no market conditions should
already reflect what that is. And it should just be surprising announcements that cause you know price moves for instance. I don't want to say we're in a perfectly efficient market but I think that over the last few months we've already realized a lot of what people's best guesses about the medium term impact of monetary policy. Jamie I want to ask you about your mining policy is not keeping in mind that Sam is very philanthropic and he's directing at some point all of his profits to the betterment of society. You have made a shift made a pivot to a more sustainable form of
mining in terms of your energy use as well. But of course most of the tokens that you're putting out. I think everything maybe is fungible. Right. So there's no way for Sam to control or for a buyer to decide which bitcoin miner he wants to get or she wants to get her supply from. What do you do about that. Yeah that sort of question comes up a lot. So you can buy miners equity specifically if you if you want to get direct access to him a miner or a miner's output. Well you don't get to choose where you're what meant your 20 dollar bill comes from. And it's really the same concept here. Interesting. We actually just had a viewer writing in about what happens to everything that you're investing in these mining
machines when eventually the last bitcoin is mined is the question from the viewer. And we're talking limited quantities in the year 21 40. We will all be dead. But there is a real wow I don't know from 10 years. The miners don't just mint new coins to use that phrase. They also are responsible for processing all of the transactions on the network. And so a component of a miner's revenue comes from transaction fees. So in the year 21 forty point one miner's revenue will be entirely from the transaction fees responsible for processing everything that happens on the network and keeping the network secure. I think people maybe don't understand that miners are responsible for the
security of the entire bitcoin block chain and we play an absolutely crucial role in keeping the ecosystem healthy. I think a lot of people think are a lot of people are cynical and think that somehow miners are going to create a forum that allows them to keep providing more supply. But it's a conversation for another time a sandbank and free. Thank you so much for joining us. Jamie Levitin of Huddy Mining.
2022-04-22 11:25
