Bloomberg Crypto 04/30/2024

Bloomberg Crypto 04/30/2024

Live from Bloomberg’s world headquarters
in New York.
I’m Sonali basak, and I’m
Tim Stenovec.
Welcome to Bloomberg Crypto.
A look at the people, transactions and
technology shaping the world of
decentralized finance.
Cryptos Richest man Binance Co-Founder
founder Changpeng Zhao learns his fate
today in a US court.
Proceedings underway this hour as he
faces up to three years in prison for
anti-money laundering failures.
We will speak about the case and the
price action in Bitcoin as it slumped
since hitting a record high.
Check ins from CoinFund joins us a
little later.
And Hong Kong follows in the footsteps
of the United States in debuting crypto
ETFs.
And Australia is potentially next.
The details up ahead.
All that and more over the next half
hour.
First, though, a snapshot of the market
and a lot of red Bitcoin lower today and
down for the week so far, 8.5% over the
last seven days.
Jan, always going to have more in just a
second on bitcoin.
No good, very bad month.
Ether also lower today.
Right now down about 5.9%.
We can go ahead and round that up to 6%.
Cryptos have just been selling off this
month on the prospect of fading hopes
for the Fed to cut rates.
We’ll of course, get an update from the
Fed and Jay Powell tomorrow.
Well, as far as crypto linked stocks
look not much better.
Shares of MicroStrategy down right now
by close to 15%.
The company did report earnings
yesterday.
It’s lower, though, just due to Bitcoin.
It being lower today.
After all, MicroStrategy, a levered play
when it comes to bitcoin.
And finally, Bitcoin miners.
Let’s look at riot platforms down close
to 6% on the day it’s ahead of earnings
tomorrow, investors likely will be
looking for commentary about how the
recent having has affected the company
generally.
Let’s look at this month that Bitcoin
has had because what a ride we have
seen.
It’s on pace to post its worst month
since the collapse of FTX in November of
2022.
Yet we have not seen anything like and
after its collapse, the US ETFs,
remember, took Bitcoin to a record high
of almost $74,000 in March.
But the demand for this risky asset has
been waning.
And if you take a look here, you do see
a significant drawdown here.
The question, though, now, Tim, becomes
whether this is a new buying moment for
the market or whether it signals more
bearishness to come.
Okay.
We’ll certainly have to wait and see
there.
Hey, let’s take a look at Binance,
because today is sentencing day for
Changpeng Zhao, also known as C Z.
We heard that from Sonali, the
co-founder of Binance, now former CEO.
The exchange, though, is the largest in
the world and its market share
rebounding from recent lows.
The company says it added more than 40
million new users in 2023.
That’s up 30% from the prior year.
The big question is what the future of
Binance looks like, especially if
seasonally ends up behind bars.
And as Tim mentioned, CS is about to
learn if he is going to be the richest
inmate ever.
Bloomberg’s Mr.
Elaina Popoola, who leads our legal team
coverage.
And David Gura from our big tech team,
joins us now.
David, give us some color around this
moment here.
Are we looking at fireworks in what we
saw in the court case or is there going
to be something more muted?
I think it’s a really important contrast
to draw as you look at these two
individuals.
Sam Bankman-fried, who really flouted
the law, obviously was out on bail and
then remanded to jail during the course
of his trial, remains in jail here in
Brooklyn, where I am awaiting where he’s
going to be sent to prison.
He wasn’t repentant at all.
In fact, that was a real frustration, I
think, in a lot of people who watched
that sentencing hearing just a few weeks
ago, even when he was given the
opportunity to speak and address that
court, he didn’t apologize explicitly
for what happened at FTX and to people
who lost vast sums of money.
CZ
is a different case.
We look at the filings that have been
tendered over these last couple of
weeks.
He did apologize to both his colleagues
and customers of Binance.
He said he took full responsibility for
what happened here.
So he is kind of abiding by the law,
going through the system in a way that
Sam Bateman didn’t.
I think that’s what’s really interesting
about this, and I think it’s why he’s
kind of pinning his hopes on here during
the sentencing hearing is that he
clearly traveled to the United States
for these proceedings to take place.
He’s been out on bail, of course, but
he’s been trying to go by the letter of
the law, at least at this stage of his
life, and accepting responsibility for
what happened with him and with
Binance’s famously.
Come on in here.
What is the Department of Justice
strategy here and what is his strategy
in terms of defending himself or his
punishment?
The Department of Justice here is really
just trying to send a really strong
message.
Like you guys mentioned, this is one of
the most powerful figures in the crypto
world, Binance being one of the largest
crypto exchanges.
And so what the Justice Department wants
to do here is deter this kind of
behavior from happening again.
So even though for the charges that he’s
facing, the sentencing guidelines are
around 18 months, the Department of
Justice is actually asking for double
that.
So really, the sentencing that we’re
going to be experiencing later today
will showcase how tough the judge wants
to be on someone like this.
Well, what’s next, even after the
sentencing, is today the end of the
story?
Well, first, what he’s asking for is
probation.
And specifically he’s asking for
probation in Dubai.
So he’s saying he wants to go back where
his base is.
That is where his family is, and that is
where he wants to be.
So we’re going to see whether the judge
is going to allow that.
And then one more thing that we’re
waiting to see after that is what’s
going to happen to the monitor that
Binance agreed to hire as part of this
deal with the DOJ
to essentially ensure that everything is
working properly.
We don’t know yet which monitor it will
be, what law firm will take that role.
And the Justice Department hasn’t
disclosed that.
But once that all wraps up, you know,
Binance is sort of, you know, now done
with sort of having any more legal
problems.
And we’ll have to sort of see whether
any other crypto firms have any similar
fates.
Okay.
Well, speaking of crypto firms, David,
you just heard me talk a little bit
about the growth that we saw in Binance
over the last year, despite the legal
troubles that season has had.
Why do traders look at Binance
differently than they look or looked at
FTX?
That’s a great question.
I mean, you look at what’s happened here
and what King has pleaded guilty to
that’s not having this kind of money
laundering anti-money laundering system
in place.
He obviously didn’t plead guilty to, nor
was he accused of taking money from
customers.
And I guess that’s the distinction here,
that there still is some faith in the
integrity of this company, which, as
we’ve seen described in legal filings by
the CFTC in the SEC, is this really
sprawling web, this giant network of
companies.
I think that’s going to be very closely
scrutinized, talking about sort of what
happens next here and how Binance is
looked at under the microscope of
regulators.
It still really is an opaque entity in a
lot of ways.
And yes, there is this board of
directors now, new board of directors
that includes many friends and
colleagues of SEISS.
So I guess an open question is sort of
what influence does he or his philosophy
or business strategy still have on this
company going forward?
But it is a company, as you say, to him,
that is still just attracting a lot of
business.
Really extraordinary reporting by our
colleagues at Bloomberg highlighting how
it sees his wealth has only increased.
It is likely to increase more as this as
this exchange is still widely used
around the world.
So it is astonishing and still a company
that’s kind of set apart from from the
rest of the industry right now.
Jim Bloomberg’s Mr.
Elaina Goff, a poet who leads our US
legal coverage here, and David Gura of
Bloomberg Quicktake.
We thank you for keeping an eye on this
for us.
I’m sure there will be much more to come
throughout the day.
Now let’s discuss this case and other
issues in crypto with Coinfund managing
partner Seth Ginns
You know, Seth, with what’s been going
on in the crypto industry, we’ve kind of
started off the show talking about how
the drawdown in Bitcoin has been the
worst last month since you’ve seen since
the FTC’s collapse.
But you haven’t seen anything like the
FTC’s collapse.
Why do you think the sentiment is so
negative and do you think issues like
this still keep some people from
entering the market?
I’m sure keep some people.
I don’t think that Binance per say and
sentencing at this point are keeping a
large number of people out of the
market.
I think what we’ve seen here is the
ETFs, which created a new avenue for
engagement and have been wildly popular,
much more popular than I think anyone’s
expectations.
That led to Bitcoin moving up very
quickly, much further than would have
been anticipated with what was happening
in the macro environment.
Now, we’ve had yields come back up to
near their highs from last fall.
We’ve had the dollar start to
appreciate, again, back toward its
levels from last fall.
And we’re still materially above where
we were at the start of the year for
Bitcoin.
So we’ve seen a very nice continued bull
trend for for Bitcoin, despite the fact
that a lot of the the macro dynamics
that have been headwinds in the past
have started to reemerge a little bit.
I think like stepping back though, the
Fed is making it clear that they don’t
want real yields to move much higher.
We’re talking about keeping rates at a
high level rather than rate increases
right now with inflation showing a
little bit of a resurgence.
So I think real yields are coming down
and that in the end is actually a pretty
good environment for for bitcoin.
So, Seth, what happens tomorrow if we
hear from the Fed chair, Jay Powell,
that we are indeed going to see rates
higher for longer?
Or perhaps that could be the market’s
reaction to the press conference
tomorrow.
What happens to Bitcoin?
Well, I mean, it’s interesting.
I’m starting to hear people ask whether
we’re going to get a rate increase
tomorrow, which I think is very
unlikely.
So I think anything short of a rate
increase is likely to drive some degree
of a relief rally because, again, you’re
looking at inflation showing a
stickiness while at the same time rates
are not likely to to move up.
And again, expectations are starting to
factor in at least some degree of
a belief that there could be a rate
increase tomorrow.
So the why does that theory hold up?
You saw Bitcoin hit record highs even
with rates being as high as they are.
Why would there be a correlation at this
point for interest rates in crypto?
So over the long run, we’ve seen a very
strong inverse correlation between
Bitcoin and broader crypto and real
yields.
So if if we think we’re in an
environment where the Fed is going to
have to raise rates in order to bring
down inflation, we would expect that to
be a headwind for Bitcoin’s price.
But what we’re seeing is a little bit of
the opposite, which is that inflation is
starting to reaccelerate a bit.
But we’re hearing the Fed say they’re
not likely to to raise rates.
What we’re hearing is we might have to
keep rates at this high level for a
little bit longer, which in fact
actually brings down your your real
yield.
So we haven’t seen a breakdown in that
inverse relationship between real yields
and crypto prices.
And Bitcoin is actually holding up very
nicely here above 60,000.
With with inflation starting to to show
a little stickiness and with the Fed
talking about the potential for higher
for longer.
Myself I want to go back to what channel
I started with and the idea of tying,
you know, all of this to what we hear
from prosecutors and from Seattle today
when it comes to see for the folks who
are still on the sidelines right now and
they say to themselves, you know what?
Crypto is really only good for money
laundering.
It’s really only good for criminals.
And they read a story like our Big Take
today, which talks about the US Treasury
Department asserting that finance failed
to prevent and report suspicious trading
by Hamas, al Qaeda and other groups.
Perhaps those people are still on the
sidelines now.
What would you say to those folks who
say, okay, well, I still don’t see the
use case apart from money laundering
here.
So I think there are a few things to to
focus on.
One is we’ve now had the government, the
US government, into finance.
We’ve had a record fine.
The CEO has had to step down.
The CEO is being sentenced today.
We had another big bad actor put into
jail last fall in SBF.
So we’re going through a cleansing
process where the industry is being
cleaned up.
Bad actors or actors that weren’t taking
the the full extent of the law seriously
are being reprimanded.
And we’re now in a position where not
only do we have exchanges that are
operating in a very transparent way, but
when you think about the commentary
that’s coming out about illicit funds,
the illicit fund commentary is because
the blockchain is transparent.
So I can guarantee you that there are a
lot of illicit transfers of U.S.
dollars that happen around the world.
But the reason why we’re hearing about
these illicit transfers with Bitcoin,
with other.
Cryptocurrencies is because the
blockchain is transparent.
There are a number of companies that do
blockchain forensics that allow law
enforcement to actually track these
movements.
Still a lot more on that to come.
Coin Funds.
Adkins, we thank you so much for your
time.
Coming up next, we’re going to talk to
Lee Drogon from Starkiller Capital to
talk about the catalysts he’s watching
next for the crypto industry.
Plus, Hong Kong debuts a batch of crypto
ETFs as regional officials are hoping
the crypto will help to restore the
city’s reputation as a modern financial
center.
And last week, I had a chance to sit
down with Cantor Fitzgerald CEO Howard
Lutnick about Stablecoins, and he had
some strong words about their future in
the U.S..
Americans should have nothing to do with
these things.
I have dollars in my pocket.
I have dollars in my bank account.
I have a credit card in dollars.
I can Venmo, you PayPal Zelle.
These are all simple things for
Americans.
We have no business being near
Stablecoins.
I think the bigger point we’re going to
see longer term is a wave of
tokenization and defi activity on
bitcoin, which is expanding the
narrative of what bitcoin is.
It’s no longer just the store of value
asset, it’s becoming a platform and an
ecosystem with a multitude of apps and
other native assets that can be built on
top of it.
That was Amanda Fabiano last week
talking about ruins and the next
catalyst for bitcoin following the
having.
Let’s bring in star killer general
partner and CIO Leigh Drogen about this
because you know Lee even if you were
excited about the having you’ve
obviously seen Bitcoin fall off
meaningfully after that and even if you
excited about the potential for Bitcoin,
it hasn’t created that buying moment off
the heels of ruins that we saw that
first day of excitement.
So how do you think about the potential
here and when things will finally turn
around?
Well, I think your previous guest, Seth
Jones, you know, put it really well
here.
We’re in a bit of an interstitial period
during what is a primary bull market
and during, you know, all of the
previous cycles, we’ve had pullbacks of
20, 30, even 40% within the main trend.
At Starkiller, we run momentum and trend
following models on, you know, the
liquid token universe.
And we’re not seeing a serious breakdown
in any of the models that we run here.
Bitcoin specifically, that $60,000 level
also happens to be the volume weighted
average price from the bottom after the
ETF approval.
So, you know, as long as the market
defends that price level, we’re still
kind of within the primary trend.
And then obviously, we’re seeing, you
know, the macro environment, you know,
take a little wind out of the rally.
It was natural that we needed to stop
after basically going straight from from
25 to, you know, to 70 K here.
And then you’ve got the all coin
universe, which had run incredibly
strong and needed a pretty, you know,
significant pullback to reset.
But, you know, in in kind of markets
parlance here, it seems like we are
consolidating over time instead of price
which after the run that we’ve had is a
pretty good sign.
Lee, what happens, though, if the market
doesn’t defend 60,000?
What if we see Bitcoin move lower?
What ends up happening to the model
then?
Yeah, so that would put it more into,
you know, a no position or or so
certainly long term.
It’s not a it’s not a short you know,
over over a longer term horizon here
given the, you know, 200 day moving
average and the other kind of longer
term trend following models.
But yeah, you could see a pretty swift
move down to 50 K which is kind of where
the support after the ETF, you know,
would come in and then we’d have a much
more kind of mixed intermediate term
trend signal at that point.
I know it’s interesting, Lee, Part of
the reason I wanted to talk to you today
is because I know that you bring math to
the equation here.
You take a look at this from a
quantitative perspective, and it feels
like sometimes from the outside that
you’re looking at people trading Bitcoin
and it is in 0,000 increments, 60,000
support, 50,000 support.
I mean, how do you think about what the
real floor is here and where things can
really stop the selling pressure at this
point?
I mean, I don’t know if this is the
answer that anybody is really going to
want, but the the honest answer is there
is no floor to any of this stuff.
Right?
There’s no real price to sales or price
to
earnings ratio here.
You know, these are these are assets
that are based on a very long horizon
view of growth.
And at any given time, those assets can
be revalued an order of magnitude up or
an order of magnitude down.
We’ve just seen, you know, half an order
of magnitude up.
And at any point in time, it’s totally
possible for them to go half on or order
of magnitude down, which is what we see
in most bear markets.
But as I said, and we agree with this,
the macro environment doesn’t really
look like you should be throwing a ton
of fundamental sell pressure on an asset
like Bitcoin right now for Etherium and
some of the other altcoins here right
now.
Obviously, the SEC is at war with with
this ecosystem and that, you know, that
has taken a little bit of the wind out
of the sails there.
Star killer.
General partner and CIO.
Lee Drogin.
Lee, always good to see you.
Thanks for joining us.
Well, coming up, global adoption picks
up as Hong Kong debuts, crypto ETFs and
Australia prepares to approve them.
This is Bloomberg.
Today, Bitcoin and Ether ETFs began
trading on the Hong Kong Stock Exchange.
Bloomberg Intelligence Estimate the
funds may amassed billion in assets
over two years.
Bloomberg’s Annabel Jewelers reports on
the debuts.
Hong Kong has taken another step forward
in its push to become a global digital
asset hub.
Today marks the launch of three spot
Bitcoin ETFs in the city following Wall
Street ones in January, but also the
start of a trade for three spot ether
ones, which is notable given that time
is currently bottle prohibited by US
regulators.
The three issuers will as China, AMC
harvest and boost Sarah.
All of those have their origins in a
presence in mainland China.
Again, that is significant because
trading in cryptocurrencies is currently
prohibited by Beijing on the mainland.
The type of demand that we can expect to
see there is question marks over that.
Bloomberg Intelligence, for instance, is
saying we could see around billion of
inflows over the next two years.
Some of the issues we spoke to already
saying they’ve seen north of 00
million on the first day and actually
the demand could go a lot further from
here.
Hong Kong has a very special
position as first as one of the most
prominent financial hops in the world
and the second highest SARS region
of the second largest economy.
Where we get to depends on a lot of
different factors, including whether
these spot crypto ETFs could ever become
eligible for the ETF Connect program to
give access to mainland Chinese
investors.
There’s also the question of whether we
can expect further products down the
road, and that was something the Hong
Kong Stock Exchange said that they’re
looking at.
We can continue to go into the physical
spot assets, maybe composite types of
products, eventually getting into maybe
leveraging inverse types of strategies.
The first step of what could be several
to come for Hong Kong’s crypto ETF
landscape in Hong Kong.
I’m out of out role is Bloomberg News.
Well, at the same time, Australia
regulators are also preparing to launch
crypto ETFs.
Sonali we’ll certainly be keeping an eye
on that development as well.
Now to an update from last week’s story
about that buy Bitcoin sign held behind
Janet Yellen.
This sign was flashed by an intern on
Capitol Hill back in 2017.
Personally, it just sold for more than
,000,000 in an online auction.
The winning bid made by an anonymous
buyer who bid 16 Bitcoin for the item.
That’s according to scarcity.
In the final minutes of the bidding, an
error made it appear that 6.4 million
was the bid before it was recognized as
a mistake, apparently.
You can get these legal pads a three
pack online for about $9.
Oh, well, I guess bitcoin can be worth a
lot when it is on a piece of paper.
Of course, that is much more as we’ve
been talking about, than a Bitcoin is
worth per dollar.
It’s art and I guess it is.
And you know what?
If it were bid over on the blockchain,
maybe there would have been more
transparent prices.
Oh, look at that.
Anyway, that’s all for Glamour crypto.
Join us again next week, same time, same
place.
And a reminder.
Access all the latest data and news on
crypto on see our wiki go on the
terminal.
This is Bloomberg.

“Bloomberg Crypto” covers the people, transactions, and technology shaping the world of decentralized finance. Today’s Guests: CoinFund Managing Partner and Head of Liquid Investments Seth Ginns, Starkiller General Partner and CIO Leigh Drogen
——–
More on Bloomberg Television and Markets

Like this video? Subscribe and turn on notifications so you don’t miss any videos from Bloomberg Markets & Finance: https://tinyurl.com/ysu5b8a9
Visit http://www.bloomberg.com for business news & analysis, up-to-the-minute market data, features, profiles and more.

Connect with Bloomberg Television on:
X: https://twitter.com/BloombergTV
Facebook: https://www.facebook.com/BloombergTelevision
Instagram: https://www.instagram.com/bloombergtv/

Connect with Bloomberg Business on:
X: https://twitter.com/business
Facebook: https://www.facebook.com/bloombergbusiness
Instagram: https://www.instagram.com/bloombergbusiness/
TikTok: https://www.tiktok.com/@bloombergbusiness?lang=en
Reddit: https://www.reddit.com/r/bloomberg/
LinkedIn: https://www.linkedin.com/company/bloomberg-news/

More from Bloomberg:
Bloomberg Radio: https://twitter.com/BloombergRadio

Bloomberg Surveillance: https://twitter.com/bsurveillance
Bloomberg Politics: https://twitter.com/bpolitics
Bloomberg Originals: https://twitter.com/bbgoriginals

Watch more on YouTube:
Bloomberg Technology: https://www.youtube.com/@BloombergTechnology
Bloomberg Originals: https://www.youtube.com/@business
Bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake
Bloomberg Espanol: https://www.youtube.com/@bloomberg_espanol
Bloomberg Podcasts: https://www.youtube.com/@BloombergPodcasts