Will the Bitcoin Bubble Burst? Bloomberg Live Summit

Will the Bitcoin Bubble Burst? Bloomberg Live Summit

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Well hello everyone. I'm Mike McGlone with Bloomberg Intelligence. Excited to be contributing to this event. It's been a great listening educational thing and I'm happy to introduce my panel will focus on Bitcoin as the name of the panel. But I don't necessarily know. We'll actually focus on Bitcoin the whole time. I spot but the will. And with that you show the chart of a coin which is clearly moving from the upper left to low light its annual chart. But my guests are Rhea Victoria Castle Island Ventures Marcus Swan Apple co-founder of Luna and David Ripley of Crackin Crack and Dominic Crack right into it. Start with RIA and RIA. My first thought is I don't want to do like a simple little intro of each person and we'll get into that discussion. What brought you from that bastion of wealth management and in what Tom Keene calls the People's Republic of Massachusetts and fidelity to Castle Island adventures where you're just in the pulse of allocating money into I would say capital into this crypto currencies digital assets space. What brought you there and what do you see.

I think you need to get yourself a. Sorry about that. Great to be here. Thank you so much for having me. So yeah. I see. Prior to joining Castle Island my entire career was in research in some capacity. So I started off as an equity research analyst covering fintech and payments. While I was in that role I kind of fell down the crypto rabbit hole and realized that I needed

to be doing this full time because at one point I was spending every waking moment not working on my actual day job just researching crypto and really enjoyed my time doing research. And I feel like that's an incredible role to have because you're essentially getting paid to learn and research. And eventually I got to a point where I wanted to apply that skillset in a way put my money where my mouth is and actually start deploying capital into the space. And you know I've looked up to the Castle Island team and franchise they've built for a number of years pretty much since I joined the space back in 2017 2018. So when the opportunity came up to join the team at me I jumped at it. But I like what you mentioned above. Put your money. I remember my first day on the board of trade I was assigned. This is in Chicago. This is in the 80s is the ultimate in other

people's money. And I suspect your bout with some of that too. Marcus I want to go to you next. I love the headline a blow to your company as we're reading the world to a better financial system. I want to get your feeling for that. Just a quick outline and your first what I heard from Mr. the head of JP Morgan Jamie Dining. And when he said you didn't care about

cryptos all. Well there's a lot of people in the world who don't have anywhere near the privileges for the people and us in this room have are just gaining gaining a better life. So tell me a little bit about yourself about Luna and what that might mean here and maybe your thoughts about Mr. Diamond set. Yeah I think look unfortunately a lot of the narrative around

crypto certainly over the last two or three years has been around investing and in some cases speculation and even gambling. Right. That it's being tied into the into the movement a little bit. And I think when a lot of people say it's worthless or it's not going anyway. Those are the things that they remember and the things that they react to. But certainly in my case you know having been brought up in Africa spending most of my career working across Africa and Southeast Asia one of the things that initially attracted me to to crypto and similar to Rio I come from a finance background and I worked in retail banking and you know investment banking all types of financial services. And and it was looking at all these real problems that people were facing across all of these markets and then looking at this technology and going look there's something about this being able to move value across the Internet really easily. That has a lot of potential to address a lot of these

problems. I think with again we people get a bit stuck. Is everyone saying oh god why cannot address all of those problems on Monday. And and as we all know these things don't happen overnight. So if you take a 10 to 20 year view on on on the industry and you're willing to not just look into the speculative slash in basement use cases then then the story becomes quite clear to a lot of people. And I think you know maybe someone like Mr. Diamond doesn't unfortunate have the time to and the luxury to kind of reflect on a lot of these things. But yeah that's that's our view. And I basically got that. So David we're going to get back to you I look at CAC and is an excavator and like oh man that's

the things I see on you. And I not I don't I'm afraid I can't anymore. But the things I see I can do physical and hedge out of the money options and taken income and stuff. And I see crack and is the center of for someone like me who loves to try to find big and markets is a cool place to be. But you can start there. You started it. Gil Darragh can you give us a little the

lay land why you're there and what kind of things you're mainly focused on. Yeah sure. You know again thanks for having me Mike. So yeah my path to crypto probably probably resonates or similar to a lot of folks in the space. And so I certainly had my my rabbit hole moment or actually probably a half year period of going down the rabbit hole where I too was you know a part time researcher of the space and just absorbed in dope and tack everything possible. This was it. This was in 2013. And so I learned a bitcoin around that timeframe and from an individual came to be my co-founder. I knew at the time in 2013 there wasn't too many things. There were too many things you could do in crypto or in Bitcoin. Other than found the company there were no company if you could go

join and do all these types of things. So that was that was my path. Again similar to similar to Marcus and founded a company Glad Darrow which was a little bit of a twist on exchange. We basically enabled all the different bitcoin and crypto wallets at the time a mechanism to uninstalling into their into their apps.

We we built Rand that company grew it crack and happened to be one of our partners in the space. And it was in 2016 after a number of conversations with. Jesse the founder of Track and we decided to move forward with the acquisition and so glad dear my company was actually acquired by my crack and that was the path that I took to join crack and then I joined as CEO. It's certainly a drastically different company than when I joined there. Probably maybe not quite a hundred people at the time. And you know we're pushing maybe close to twenty five hundred now. So it's definitely different company. It's been an exciting five years. OK lots and lots of good backgrounds everyone. Thank you. I want to circle back to Rio. We are the thing I think we want I'd love

to get out of you as I'm sure you can't dig into specific issues where you're seeing opportunities and where you're allocating capital. I sense that being per trade discussion you're looking at other countries developing markets. Tell us a little bit about what you're seeing and what you expect in this space revolution in the next how about next 20 20 to. Yeah definitely. So you know one ISE as you mentioned one area that we're really excited about is companies that have expertise in local developing markets like Reno for example. Yellow Card is another example Pinta is another example that are building infrastructure that is for the most part built out in developing markets but catering it to developing markets such as Africa South Asia South America. And yeah that's something that we're really excited about because I think the value of something like Bitcoin and digital assets more broadly is unique in these markets that are facing hardships in the form of inflation. Currency devaluation capital controls. There is a large amount of remittances flowing in and out of

these countries and they make up a significant portion of their relative GDP. So to the extent that crypto assets are able to kind of alleviate or provide optionality to citizens in these regions that's really exciting to us. And we're excited about companies that are building infrastructure that facilitates that.

I think if you think change policies recently published their geography cryptocurrency report and what they measure is not you know aggregate transaction volume across different markets but grassroots adoption across different markets. And then they construct an index based on like on chain transaction value and then P2P trading and adjust it based on purchasing power parity per capita. And if you look at the list of the top 20 countries in that index they all are mostly within Africa South Asia and South America. So this is definitely something that that we're really excited about at Castle Island. Thank you Marcus. You want to piggyback on that a little bit to me. The key thing that I think it's not widely known in this country amongst our leaders Zite as part of ESG and cryptos. I just hear about it when I see it and I see it from colleagues. I

have a colleague from Zimbabwe say he loves Bitcoin. I wonder why. Talk to me a little bit about what you're seeing and what you're doing what you're to make it. And also a little bit like we mentioned earlier you're seeing some part of me represent part of this major fund flows of capital coming into space into your space. Yes for sure. I mean look we we when know we have on the ground operations in most of these markets Nigeria South Africa Malaysia Indonesia. So we get a lot of data on what people are doing and what they're using things for. I think that you know there's definitely some some really encouraging signs. Iran you know adoption certainly we can see in our demographics and in

our in our data that people are very quickly shifting from purely speculation and trading into more like treating it as like an asset and thinking of it as a long term investment. We are seeing demographics shift to lower age groups very quickly. So interestingly you know a couple of years ago it was mostly people in their 30s and 40s that could afford to buy crypto. They were buying it and now it's you know shifting to people in their early 20s. So that's happening. We of course do see people using it for transactions. It's still in the minority. I think that's also partly because you know it's it's in bitcoin because it appreciates so much so quickly. People tend to hold onto it. So I think with the

introduction of stable coins and certain other things that are being built there on top of a theorem and a few other interesting technologies we'll see that stock picking up as well. So we are seeing the first signs of it moving away from this early speculation to asset class and then into into transacting. Having said that a lot of the users at the moment are slogans relatively same type of people that you would get in in developed markets. They live in cities. They have disposable

income. They often speak English or they're well educated. But like I said the tipping point is starting to tip towards those other other kinds of use cases. So again it's having a little bit slower than what most people wanted to happen but also a lot faster than most people outside of the group the world actually believe it to be. Dave I want to transition to you in a sense I

guess what crack is doing and is what you're doing with accessibility to the space and efficiency you're helping provide. I want to rope in a little bit with these exchange traded ETF potential that futures competing with what you provide in your platform. Tell us a little bit about them where you think that's gone and what crack is doing in this space. If you could. Yeah yeah absolutely. So CAC as a business we know obviously we started as

you know you know our peers on exchange. We've we've absolutely built on and added a number of new products and features that I think you're absolutely right. One of the things that we bring to the space is accessibility a way for individuals businesses funds to get into crypto you know obtain crypto by crypto. I think you know the business is largely in the majority of our our business actually comes from Europe. The U.S. is you U.S. North America is our next biggest market. That's a big chunk of the business. So we do lean towards I guess the developed markets. But one interesting thing that is actually a meaningful part of our business is partnering with a number of those businesses in the developing countries. They get

their liquidity from crack and in many instances. And so that is much more possible with crypto. Right that you know these two exchanges one in developed country like crack and and then another in developing part of the world Latin America. And what have you heard in that way. I think that's you know another interesting way that we like indirectly support a lot of the developing market growth. And frankly you know that's our mission. You know without a doubt is

to is to is to grow crypto globally because we really see it as the best way out there to achieve this goal of financial inclusion. What trips you up but what you're worried about. I want to transition to regulation and stable coins. But since you mentioned what what what are you worried about. Yeah. So you know it's interesting for cracking there are like the you know the most classic things that you know that are out there right. Yeah. The first one is security actually. Right. You know it's you know we sit on about 40 billion in assets right now. Most of its crypto smaller much small fraction of it is Fiat. And you know that's that's a significant responsibility. We invested an enormous amount in security or security teams pushing 100 team members right now. And so that's really a

meaningful part of the business. And I would say you know no one on the list. We think of all the risks. It's the one that we've invested the most heavily against and the one that we're you know I'm the most kind of flight control and control over which is great. I mean I think you know regulatory is an interesting one. Yeah it's out there. I think you know we see regulators in the US in Europe in all parts across the world. We're licensed in a bunch of different geographies and registered and taken different different steps with regulation. I think you know one of the things that becomes much more interesting not just crypto but you know even the Internet generally is you know we're starting to see competition among regulators and governments in a way that you know we didn't we didn't see many years ago. And that's one thing that you know crypto I think is enabling. And so you know as as different regulators and governments kind of jockey for for

position in the global economy I think it kind of sets up for a beneficial dynamic in the right dynamic for governments and regulators ideally support innovation in technologies like crypto. I want to transition to similar questions topic and I'm happy to go wherever you want is to me the key thing about next year is going to be regulation. I think it's going to focus mostly on crypto developers which to me has just set an evolution that's going to that's going to come compete clearly with euro dollars. And here you show that massive increase in crypto dollars. People talk about Ted they're like yeah. There's a dozen. What do you see for risks. And I my sense is the whole what I've seen organically most notably in non U.S. countries people want and get access to the book. I mean they're not gonna want you to see that you're more focused but what you see is potentially where that's going. And the quote I heard earlier I think

Michael Safe says it's either going to zero or going for 120 billion to add a couple zeros next few years. Give me your outlook. What do you think is the key thing I want to get out of all of us is potential for regulation potential for us to mess up which I think is unlikely. And the bumps in the road which investors expect next year which of course was kind of a tough question. Yeah I mean yeah I'm sorry. My God I meant for Alien Cypher for real and that one meant for Rio. But David if you have one thought once you finish it and then we'll go to you. Yeah. I

mean just real quick. I absolutely agree. Mike Rann. Regulation is going to increase. It's going to increase. I mean I do think there's ideal a way to do it the right way an ideal way to do it the wrong way for crypto. And so we absolutely see it across the board. Yeah you're right. I agree. I definitely agree with them. David I think you know one thing that's significantly different about the industry now versus maybe a few years ago is the number the amount of dialogue that crypto companies are having with regulators. The fact that you know institutions like crack in a T are actually already being regulated as banks are have divisions that are regulated as banks. And then you have institutions like Coinbase which went public

and have the capital to lobby and and and vocalize what this industry means. And I think that you are seeing more and more regulators in the US outside of the US understand that there is a right and a wrong way to regulate this industry. And I think that regulators are putting in the work to understand what is the right way of regulating this industry. It definitely won't. Not everybody will be converted overnight. But to see the forces growing every single day in and out of the industry and and just you know with the rise in the value of the industry as a whole having the capital to the boy to have conversations with regulators and teach them about the right way to regulate this industry is really exciting. So I think you know regulation the

right type of regulation is good and provide certainty and clarity for businesses that are operating in this industry. It's just making sure that that right. Regulation is implemented. Marcus I feel you're at the tip of that of that evolution. And then once this is properly like regulated. So I think we're gonna look back at history from the future and you're in a key place and make the world a better place. By helping lift people out of poverty. And that's what I'm saying. But your thoughts on that that concept and kind of my optimistic view for what you're doing in the space that's going to make money. You know look I

mean I think regulation we all agree it's important. It's it's something that we're going to. You know we we all want to happen. I mean we've been working closely with most of these regulators around the world for about saving ideas now. So we know what they think what what I can. I might have a slightly different view here in the sense that generally speaking we found the regulators have been really pragmatic about it. They could have banded most regulators. They didn't. They still trying to come to grips with that a little bit that the people have really been de facto regulating the industry over the last few years has been the banks because it's the you know a lot of most crypto companies need some bank account to be able to operate. You could say well now a lot of companies that do it if TS and define don't need it. Well they do still need it because

they need the on ramps. They need people to come to us or to Dubai the group that to the incentive to use those things. And so the banks have put a lot of criteria placing you need to do X Y Z in the absence of regulation. If you're lucky enough to even get a bank to do that. And the banks obviously a very different incentives. They are very risk averse. They've you know you've

seen a lot of fines and that they've had over the last few years. And unfortunately that risk hasn't really gone away. So even though you know of course regulation is important we're going to see that piece a lot. I would say there's still this overhang of banks making their own decisions. You know we've had countries where there is full regulation in place and we have regulated legal entities and the banks are still too scared to move into this space because of you know whether it's reputational risk or they just don't have the resources to to do to manage this risk. So I think that's going to you know the

bank's going to play a key play you know be a key player in this. And any fight to maybe just say one more thing about you know what keeps me up at night which is related to this. But the level of misinformation and low level of education on crypto is absolutely astounding. Still right to vote for a lot of people who have gone down the rabbit hole. You just think everyone gets it now. Come on. How can it be. And so on. But how that manifest itself in real life is not just with consumers and getting more

people to use it but all you need is one person on a on a bank's risk committee or at a regulator. You know a committee that needs to make a decision that rates. Some article about wine mining being bad for the environment or they saw some Facebook post about money laundering and crypto which was just click bait and this thing took such a strong emotional hold inside that discussion that you have these institutions that are actually relatively neutral slash pro bitcoin or crypto. But then you have some individuals that are so emotionally against that and often by some quite ill informed data points and that that friction makes it very hard. We want to move forward. So I think just education and at a basic level of education for everyone around you know everything the reality the pros and cons of it. I think that's incredibly important.

And sometimes I feel the industry we've moved it around a little bit too quickly just assuming that everyone's on the same page at Jason Kelly most people are not. Well I just want to pay you back. Yeah sure. Yeah. I just want to be back off of what Marcus is saying. I think that's such an important point. And that applies to regulators. It applies to financial institutions that are banking this industry and it also applies all the way down to boots on the ground especially in developing markets individuals that don't have access to the same level of education information that we do in developing markets about space. And you know as a part of our deep dive into Africa as we were evaluating the yellow card opportunity. We we did interviews with different employees in countries like Ghana Uganda South Africa Kenya. And we found that the biggest

risk that they face is individuals that you know they're hoping to onboard as users that have been burned in some kind of scam Ponzi scheme that completely taints their whole view of the all crypto assets. So I think that is the lack of education applies all the way from the top to the bottom. As a big risk that we need to address. So awesome thank you for that. We have three minutes left. I think really I might have to leave that with your last remarks a little bit. Time for a day that Marcus and I want to split

completely the Bitcoin. What I saw happen we all saw happen with this recent launch. An ETF I look at that is that's a massive opening up of a cash and carry trade where no the futures restrictions where it's only 3 to 1 leverage. I'm just twenty one. I'm from futures are going to open up and the world's going to say hey I can get almost free collateral home holding bitcoin sell. Then I'm on a futures and hedging it in a hedge fund. 5 the one that's with that's conquest question. That's what I see happening. Marcus let's go to you on that thought. What do you think. We're going with that. Look I mean it opens you know anything any instruments like that opens itself up to all kinds of layering on top of that. So. So

I think you know without going too much into the specifics I think it's setting the you know it's building like a platform for additional innovation to happen on top of it. I would argue that a lot of the innovation is probably going to just mimic existing financial markets. And you know it's not necessarily going to makes a big difference if the crypto layer. But what it does do is it increases adoption and it probably is going to have a positive effect on the price. And you know the more people that get involved in it one way or another the better. So I think these you know these feedback loops are going to you know indirectly lead to more adoption and more people using it. I hope so. I think it's very positive. They've got two minutes. It's all yours. Yeah. Yeah I agree with Marcus. You know this is you know it's

it's it's an initial step for a lot of individuals to get into this space. And it's that much lower of a barrier for many individuals to you know to go and purchase an ETF from their brokerage accounts. I do think there's like a meaningful you know retail play in addition to one of the groups of customers that we serve quite substantially are more kind of like active traders pro summers. That group will absolutely engage in some of the trades that you mentioned Mike. You know looking to find an arbitrage against the futures versus you know versus the spot markets as well. And so I think you know. Wow well it's you we can say it's you know not the same as like actually you know but purchasing Bitcoin downloading into your own hardware wallet holding your own keys all of those various different types of things. It's still a step in the

right direction to the extent that people have exposure to crypto. They move down that path of gaining more education in the space. You know these are all positive things. And you know the second step for them or the third step or force that could very well be to actually own bitcoin and then potentially serious and hold their own keys. And all those things could could certainly come in in line. Following that first step. Well your timing is perfect. I just love this. What's happening in this world right now where it's been completely banned in China and these bastions of capitalism in Europe and Canada US are launching futures and beauty apps and saying OK well fine you ban it. Well we'll just adopt new technology and good luck with that one. So I'm just curious how it's going to all work

out but actually it's called the Digital Cold War developing and you're right in the center of it and it's going the right way with that. We've got exactly six seconds left. So we nailed it. Appreciate your contributions. Really appreciate comments. And we'll pass it back to the moderator. Thank you.

2021-11-11 12:11

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