Bloomberg Crypto 02/20/2024

“Bloomberg Crypto” covers the people, transactions, and technology shaping the world of decentralized finance. Today’s Guests: Crypto is Macro Now Author Noelle Acheson and Ripple CEO Brad Garlinghouse

Live from Bloomberg’s world headquarters in New York, I’m Sonali Basak. 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. It’s a Bitcoin boom. The price has tripled since the start of

2023 and has now climbed for four straight weeks. We’ll discuss that. This momentum can be sustained with analyst and author Noelle Acheson, who has some concerns connected to the recent launch of Bitcoin ETFs and an exclusive interview with Ripple CEO Brad Garlinghouse. We’ll discuss its token XRP regulation,

Legal dealings with the SEC and recent dealmaking. So that’s a lot to discuss. We have a lot ahead, but first, let’s get a snapshot of the market. The best way to do that on your Bloomberg terminal c r y p go and wow, it has been a bitcoin boom in recent

Weeks. It isn’t booming today as we see this wider risk often taking hold in markets, especially in some of the tech heavy industries like the Nasdaq 100. So perhaps not all too surprising to see digital assets really down across the board.

Bitcoin not immune to that right now. Lots of steepening down by just about 1% on the day. We’re still north of 51,000 or more specifically north of 50,000, which of course we broke above last week. We’ve held above that level for about six days now.

We’ll see if that can continue. And you’re seeing some more underperformance from other tokens out there. Ether, of course, has been enjoying a rally of its own right now just south of 2900, down by about 2.6% on the day. Well, some of the other tokens, altcoins

Out there are underperforming to a larger degree XRP, which of course, we’ll talk about with Mr. Garlinghouse in just a moment, down by about 3% on the day and Solana down by more than 5% nationally. But let’s talk about the broader rally here.

Let’s talk about it. When we think about the king maker, the largest cryptocurrency bitcoin, because it has rallied for four straight weeks and in the past five years, the token climbed on average 49% after or over three months after those four week streaks that we’ve seen.

And if you apply technical analysis here, Elliott Wave studies to Bitcoin. It would suggest a retreat towards the $40,000 level before it advanced above 70,000. And that compares with Bitcoin’s all time high of 68,992 in 2021. And that was back when the world was

Awash with stimulus. So some cases there Kaylee for those Bitcoin bulls. All right. Well, let’s get more of a case for how this rally is perhaps going to continue, are not. Joining us now, Bloomberg’s Isabel Lee to discuss who has been reporting on this with our crossed asset team.

So, Isabel, how much conviction does this rally really have? So there is a lot, actually. And I love the data that Sonali pointed out, because according to technical analysis, every after four week winning streaks, Bitcoin climbs 49% in the next three months.

So this puts Bitcoin at 78,000, which is squarely above the all time high of around 69,000. So that’s technical analysis. And if you need more data, we have data from Deribit, that’s the largest crypto options exchange saying that the bitcoin call spreads are among the most popular

Strategy. So this just shows that investors see more upside. Now let’s go to fundamentals. We have a lot of things going on, several factors boosting the optimism in price. We have the Bitcoin ETF, which debuted around five weeks ago. We have the having later this year.

I mean, just a general optimism. You know, each day that passes its each day further away from the spectacular collapse that we saw in 2022. So a lot of investors are really excited about the space. We see a lot of investors piling in. Maybe retailers and tourists are back

In. But for now, there’s just really overall optimism around the space. Bring us one level under the surface here. You mentioned that call activity. What are options markets telling you as well as the types of people who are buying in now that maybe haven’t before? So whether ETFs, we are attracting a lot

More retail traders because it’s accessible to everyone and that’s really why people wanted ETFs to begin with. But that may not be such a bad thing because we need excitement, we need trading volume. And when it comes to ETF, I just want to bring up the fact that in five weeks we

Saw around 5 billion in that flows and that’s including the outflows of 7 billion in BTC. So this is really an accomplishment, especially for BlackRock. The BlackRock ETF has grown around 5 billion and that’s 5 billion in five weeks, putting it squarely at the top

Seven ETFs in a room out of all the 3400 ETFs and also in the top 20 when it comes to the large five five years ago. So really a lot of great things happening in this space and institutions are also waiting to get in. Some are already in, but some are still waiting.

But then there’s so much to be excited about in the space, actually. Money on the sidelines. Bloomberg’s Isabel Lee, we thank you for your analysis. Now, last week we spoke with John Woo of Ava Labs about the Bitcoin rally and he says it comes down to adoption.

What is going to really drive it besides known factors such as Bitcoin halving or possibly the Etherium ETF, it’s going to come back down to where is the adoption awareness happening. So as an operator of labs helps companies deploy on top of Avalanche, the blockchain, we see far more activity

Today after the Bitcoin ETF because of this halo effect, awareness of the space from traditional enterprises, from Wall Street firms. So you look at the developer count, the application count, all have been increasing dramatically. That’s ultimately where the asset class is going to improve from fund the fundamental adoption.

So let’s continue this conversation with Noelle Acheson, author of Crypto is Macro Now. Noel, great to have you on the show. As we heard John Woo there talking about adoption, some of that coming from institutions. There also is the question of to what

Extent retail traders, mom and pop are behind the rally that we are seeing. Are we seeing signs that that kind of activity is coming back in in a more material way? But I wouldn’t say in a more material way. Yeah.

And you can tell from where Coinbase as an app store, for instance, it’s not really buy yet. You can tell from the Google search it’s not really high yet, but it is obviously more retail than we had the time last year. And a lot of that is down to the ETF.

But now that there’s not yet retail market, this is a very good sign. When retail starts offering you know you wearing the stuff that the sales principles. How do you know that institutions are actually on the sidelines in this current rally? Well, many are still on the sidelines, though.

Many are still getting their heads around, warming up in half a world away. And a lot of the victims believe it for their own good. I have the science without something that they fully understand. It’s not quite easy because it takes some time. They also so many isoforms are gearing

Up to our side of the coin here for their. First of all, the case to get on the political road yet to make them the other Americans known beyond the sensitivity. You’re going to want to hear that a lot. There’s a lot to do still.

And we have to find the children who they are and be ready to deploy a team. Well, of course, Noel, a lot had been predicated on the idea that spot ETFs were going to be approved. That happened in January.

Now we’re all looking ahead to April and the whole thing I just the having I just wonder to what extent you think prices are already reflected of the anticipation of the event, the idea that they’re going to be perhaps more

Constraint on supply and then what kind of catalyst it actually could be if the market is already pricing it, it. I’ve got to be gradual in my opinion. We could see a run up into the huddle as we have every other holiday.

And I know when people think it’s I can’t Bloomberg Markets therefore Typekit know that some people understand the is before. I will have to bear in mind for that. Not only will the halving be happening more of the same that the ETF marketing reforms are getting going, but even

Being profitable by the time we are no more money printing on paper desert or any sovereign spike will be gear up for that as military spending has to be held as surplus spending. Again, that’s a whole different now going to be guiding it that will contact look the provably hard supply of bitcoin

That more effort a lot of expensive up on the retail side so it is not yet priced that we don’t have since I have nothing to get ahead of it but that’s how the market works. Noelle Acheson from Crypto is macro now.

We thank you so much for your time. Now coming up, we turn to regulation and stablecoins with Ripple’s CEO Brad Garlinghouse. And Michael Saylor says Bitcoin ETFs are opening the gateway to capital as Microstrategy’s holdings top $10 billion and to access all the latest data and

News on the terminal, check out see our wipe go. This is Bloomberg. One of the challenges on the Bitcoin markets, David, is so much of it’s traded on trading platforms that are non compliant with our laws. Now Bitcoin is not a security, but they’re trading on those platforms, a

Lot of other crypto tokens. Without prejudging anyone. I have to be careful that with hundreds of other crypto tokens on there, likely there’s other securities and we we’re in court in a number of these cases. That was SEC chair Gary Gensler last week with Wall Street week to David Westin.

And we’re going to discuss the companies that have tangled with the SEC with one major company. Now, Ripple’s CEO Brad Garlinghouse joins us here in studio. It’s worth kind of going back to your case with the SEC first, because you are far along.

And as we sit here today on February 20th, how would you describe how the dispute has changed? Well, I think for whatever reason, the SEC decided to make Ripple their first major case around this and the reality. Prior to the case, we had been advocating for more clarity around the

Rules and regulations. And the good news has been other countries around the world have leaned into that and codified what should the rules and regulations, what’s unique about crypto that needs to be changed? The FCC, frankly, is just hired more litigation that, you know, what we call

Regulation through enforcement and really just started suing lots of people. And what’s unfortunate is they have lost consistently. They lost the ripple case on everything they cared about. I mean, even the sound bite you just had up your chair, Gensler is saying that a lot of these are securities.

What the courts have said and the cases they have brought, and certainly the case with Ripple and the token XRP, the court determined that XRP is not in and of itself a security. When do you think that this will finally

No longer be an overhang for you guys? You’re one of many companies that are fighting the SEC at this point in time, but when can you call this an all clear? And do you think that this will make it so far as to reach higher courts or hard

To predict whether it’s going to reach higher courts? Everything we cared about, we won against the SEC. Will the SEC appeal and move it up the courts? We’ll see. They sought approval to do what’s called an interlocutory appeal. The courts denied that.

Also the case against me personally and Chris Larsen personally, it was dismissed entirely with prejudice. So, look, from my point of view, the SEC has lost consistently. They lost the grayscale case. I think if you’re following the Coinbase case that the tone from the judge is, I

Think, pretty skeptical about some of the SEC’s arguments. It stops, I think, when the SEC either realizes they’re losing consistently, consistently, or you have Congress lean in and writes new legislation that’s probably going to be hard in an election year. Maybe we’ll see legislation around Stablecoins this year, but I’m hopeful

And we’ll continue to advocate in Washington. Well, you mentioned the grayscale case, Brad, and it’s Kelly in Washington. Obviously, that was pretty instrumental in ultimately the FCC granting approval to not just grayscale’s conversion to a spot ETF gbtc that is, but spot Bitcoin ETFs more broadly. I’m sure you’ve seen there’s blogs out

There about potentially an XRP ETF being in the future. What do you make of that speculation? Well, Kelly, good to see you. I think it only makes sense there will be other ETFs too. It’s a little like, you know, the earliest days of the stock market.

You don’t really want to exposure to one stock or one company. You want to typically think about diversifying risk and what have you. And so I think we will see other ETFs when we will see them is hard to predict. You know, the sad reality of what we saw

With the Bitcoin ETF is it was only because the courts forced the SEC SEC hand and really chair Gensler’s hand that we saw that finally come to fruition. And look, in my opinion, it makes these markets safer, it makes them more robust. And so this is good for the investment community.

It’s kind of lean into that. So you would welcome an XRP ETF then? We would certainly welcome it. And I think it’s inevitable that there’ll be, you know, multiple ETFs around different tokens. I think you’ll even see ETFs potentially around baskets that also, I think

Further diversify that risk given there’s so much excitement around the ETF dynamic here. Are you in talks with the largest issuers, particularly BlackRock, to get this done? Well, I’m not going to comment on that. I know BlackRock has said some things publicly. You know, we think it makes sense for

The XRP community overall. You know, Ripple obviously is a very important stakeholder in the XRP ecosystem, but we’re not the only player. And like we’ve seen even before, the SCC lawsuit, XRP was the second most valuable digital asset, I think because

Of the headwinds of that lawsuit. You know, we’ve now seen that largely abate, but the long term view on these things is about, you know, how do you create utility and really solve real world problems with these different digital assets. Bitcoin is doing that very well as a

Store of value. XRP in its dynamics around being very fast, very efficient and low cost on a per transaction basis makes it ideal for payments. And that’s where Ripple really has leaned into as a company. Well, let’s talk about where else Ripple is leaning in. You’ve recently acquired standard

Custody. What is that going to do for your company? Well, look, we think there’s some basic building blocks around crypto that are important to make crypto successful. Custody is an important part of that for institutions to be able to custody both

Their own as well as their customers. Digital assets, we think is very important. We’ve made two acquisitions over the last year in this space. One was a company in Switzerland and then more recently the standard custody, Standard custody in particular, it has a

Trust license here in New York, which also makes it very valuable. Everything we have done at Ripple has compliance first, and I think this year, 2024, with FTC’s behind us with some of the Binance’s dynamics largely behind us, I think has to be a compliance first mindset for all of the crypto industry.

How far can your foray into custody really go? You think about what’s happening with Coinbase and its role in custody when it comes to these ETFs. How do you envision your your role in custody expanding over time? Well, there’s a it’s a pretty fragmented

Market today. Coinbase is a player player out of five or ten players that have small pieces of market share. We already have signed up with Ripple’s custody Solution, HSBC. We have BBVA, a leading partner of ours called Zodiac.

So, you know, we feel very good about the momentum we have to kind of the larger banking infrastructure, but we also intend to compete at a more regional financial institutions, as well as with some corporates who are starting to look at custody in their own crypto also.

Right as we have this conversation with you, Nikki Haley, the Republican presidential candidate, is giving a state of the race speech in South Carolina with that primary just days away. She says she’s not going anywhere. She has no plans to quit the race.

But just a few weeks ago on the show, Tim Draper, of course, a pretty prominent Bitcoin investor, was talking about what kind of president she could be, what she could do for innovation like digital assets. And I just wonder, as Ripple is looking ahead to 2024, how consequential do you

Think ultimately who’s in the White House, what the composition of Congress could look like as well down the ballot will be in deciding the future of digital assets? Is there anyone you would support? Well, at the most macro level, I think it’s incredibly important that the US

Regain a leadership position around crypto regulation. We are a laggard. We are behind other major countries like the UK. I mean the European Union as a 27 country membership is ahead of us, that they’ve gotten 27 countries to agree to things that we as one country can’t get our arms around.

So I think it’s very important, you know, over 20% of the US population already has direct or indirect exposure to crypto. And so it only makes sense that it’s an issue. As you probably know, Ripple, Andreessen Horowitz and Coinbase put together a

Super PAC and we each put $25 million behind it to support candidates that are pro crypto and promote constructive regulation and engagement, really being pro-innovation but protecting consumers at the same time. I think that for a lot of politicians, crypto has become a sound bite where

They don’t really understand how crypto works and the they say things that actually don’t even back up with facts. So, you know, I do think it’s a it’s a campaign issue. Ripple has leaned into that. I personally, you know, my donations are bipartisan, but certainly pro crypto and

That’ll continue to be the case. I’ll even highlight just today. John Deaton, a very prominent pro crypto guy, announced he’s running against Elizabeth Warren. So I think you’re going to continue to see that, correct? So with that said, also we know that

Elizabeth Warren is trying to make the crypto industry’s regulation around AML laws and KYC laws more akin to that of banking. Is this something a lot of the crypto industry has been very upset about? Is this something you’re actively fighting? Oh, no, on the contrary. I mean, I would actually argue that

Elizabeth Warren has it wrong. I mean, if you sign up on Coinbase, you have to get KYC, know your customer, you have to go through a verification process of providing your licenses. And they do that verification. And as I said before, the vast, vast, vast majority of people who are in the

Crypto industry are good actors who want to play by the rules. We need to know what those rules are sometimes, but that KYC and AML are not rules that are confusing. And I find that the vast majority of the industry players are already leaning into that.

I think Elizabeth Warren wants us to believe that those are things that somehow crypto circumventing, but that’s not the real world. All right, Brad Garlinghouse, always great to have you on the show. Thank you so much for joining us. Brad, of course, is the CEO of Ripple.

Now, we do have some breaking news we want to mention. Reuters is reporting that Occidental is exploring a sale of its 49% stake in Western Midstream partners. Western Midstream has a market value of more than $18 billion, including debt. And right now, Occidental shares are on

The back of this news, off the lows of the session still, though, down by about 1% on the day. But coming up next on Bloomberg Crypto, Michael Saylor of MicroStrategy says that Bitcoin is the strongest asset class and explains why. This is Bloomberg.

Let’s talk about MicroStrategy, because their Bitcoin holdings are worth a staggering $10 billion, sitting on unrealized gains of almost 70% based on the cost basis. Chairman Michael Saylor spoke with Bloomberg earlier today about its bet on Bitcoin. Bitcoin is, is the exit strategy. It is the strongest asset.

So what we see right now is that Bitcoin is just emerged as $1,000,000,000,000 asset class and it’s alongside names like Apple and Google and Microsoft. But the difference between Bitcoin and the Magnificent Seven is Bitcoin is an asset class. It’s not a company.

There’s not a lot enough room in the capital structure of those companies to hold 10 trillion or $100 trillion worth of capital. So bitcoin’s competing against gold, which is ten acts. What it is right now, it’s competing against the S&P index, it’s competing

Against real estate, a $100 trillion plus asset class as a store of value. So we believe capital is going to keep flowing from those asset classes into Bitcoin because Bitcoin is technically superior to those asset classes. And that that being the case, there’s just no reason to sell the winner to buy

The losers. Well, let’s talk a little bit more about MicroStrategy, the business, because of course, especially taking a look at the share price, this is treated as a bitcoin proxy, but you do have that underlying software business. You take a look at the most recent earnings report. Sales declined 6% year over year.

What do conversations with the board sound like? Are there any concerns that, of course, the strategy of buying Bitcoin, that strategy will harm its focus elsewhere? We think the Bitcoin strategy has been very accretive to our software business. We continue to generate healthy cash

Flows in the software business. We’re very enthusiastic about our A.I. initiatives and also we’ve got a healthy migration from on premises to the cloud and the software business. So we’ll continue to develop by software and we’ll continue to exploit API and we’ll continue to work on our Bitcoin

Application initiatives. But having said all that, the real story here is trillions of dollars of capital flowing from real estate or the S&P index or gold into this new asset class called Bitcoin. Well, internally right now, Bitcoin is seeing its losses on the day steep and

We’re only down about 2%. But going back toward that $50,000 level and probably not completely separate from that, MicroStrategy is down by about three and a half percent on the day. So being a proxy for Bitcoin kind of goes both ways. You benefit for the rally sometimes, but other days it hits you.

Other days it hits you, particularly when they’re ETFs in the market, too. That does it for Bloomberg Crypto today. We’ll be back next Tuesday at noon for Kailey Leinz. I’m Sonali Basak and this is Bloomberg.