Bloomberg Crypto 04/23/2024
Live from Bloomberg’s world headquarters
in New York.
Welcome to Bloomberg Crypto.
A look at the people, transactions and
technology shaping the world of
decentralized finance.
And having has come and gone, but not
without some drama as Bitcoin fees have
soared.
We’re going to discuss what is next for
the top crypto asset.
Plus, Stablecoin gets a fresh push in
Congress.
Kristin Smith, CEO of the Blockchain
Association, joins us to talk about the
importance of the legislation.
And a group of investors and customers
agree to drop their claims against
co-founder Sam Bankman-fried.
We’re going to tell you why.
That’s all ahead over the next half
hour.
But first, here’s a snapshot of the
market action.
All you just mentioned the having has
come and gone and Bitcoin’s price in
response was, well, muted, to say the
least.
That having happened just after 8 p.m.
Friday, Wall Street time.
And the price didn’t move that much.
Immediately after that, though, we have
seen a general risk on muted assets over
the last couple of days.
We’ve seen the price of Bitcoin move up
since the having by about 3.7% similar
moves for ether since then, ether now
higher by more than 1%.
Now two crypto linked stocks just
surging this week.
Check this out.
Coinbase rallying 7% yesterday and is
higher today by 3.4%.
The bitcoin mining company riot
platforms rallied 23% yesterday, higher
today by 3.7% and MicroStrategy also
surging yesterday by 12% and also higher
by 1.6%.
Sure, no riot platforms are down about
25% so far this year.
Now, Tim, if you look at Bitcoin after
the having you had a relatively muted
price reaction after that having event,
but the average transaction cost on the
network jumped.
It actually soared really before coming
back down, adding to the exuberance
around the having and providing miners
with a windfall.
Remember, there is a protocol also
launched over the weekend on the
network, the hash rate index.
Remember, this includes transaction fees
and other information about the Bitcoin
network.
It surged as high as 82 above that
level before tumbling back down closer
to $80.
All in all, miners earned over 109
million in revenue on happy day.
All right.
Well, let’s continue to follow the money
and talk flows here, because appetite
for global crypto funds continued to
decline last week, crypto outflows
totaling $206 million in the week
through April 19th, within that Bitcoin
ETF actually saw 92 million in
outflows in the last week.
As we have seen a risk on mood hit
markets, including crypto.
This week, we’ll see what it has in
store finally.
And also Kraken’s head of strategy
Thomas Profumo, explained why the
hacking event was so important to the
crypto community and for everyday
investors.
When the having takes place, 94% of all
bitcoins that will ever exist will have
been mined and less than 1% will see
less than 1% inflation in the
circulating supply of Bitcoin going
forward.
So that’s a really powerful story.
Well, let’s bring in our Fabiano
consulting founder, Amanda Fabiano.
She consults a crypto mining businesses.
Mandy, good to have you with us this
afternoon.
We spent a lot of time over the last
couple of weeks talking to miners ahead
of the halving now that it’s come and
gone.
I’m wondering what their biggest concern
is moving forward.
Hey, Tim, thanks for having me.
I think the biggest concern moving
forward is going to be what happens long
term with fees.
So the security model of Bitcoin relies
on fees to increase.
And as Sonali said earlier, we have seen
that happen a lot over the weekends.
The reason for the fee spike in Bitcoin
has been because of the launch of runes.
So should runes be successful and have
sustainable adoption, it could vastly
offset the loss of revenue for miners.
So what are you advising them to do in
this post 2020 for having ERA?
I think operational excellence SGA costs
are going to be extremely important and
also really taking a look under the hood
at the Bitcoin development that is
happening.
Speaking of development, if you think
about runes as you’ve been talking about
for a moment here, can you explain
exactly why that caused the fees to
surge so drastically over the weekend
and how you think about volatility
around these fees?
Sure.
So Runes is a new fungible token
standard created by the creative
organelles, and that allows people to
inscribe arbitrary data on Bitcoin like
art.
When Runes was launched this weekend, a
lot of people wanted to get a specific
ticker.
And so we saw this massive rise over the
course of the weekend, right.
Because everyone was really going
towards, you know, making this thing be
successful.
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 in an
ecosystem with a multitude of apps and
other native assets that can be built on
top of it.
Right now there’s a lot of random things
being added to Bitcoin and yeah, some of
them are a little bit ridiculous in the
moment.
But I think the bigger thing is this
opens the door for longer term
optionality of tokenization on Bitcoin.
That’s what I was going to just ask you
about the longer term tokenization going
beyond runes.
How important are runes in particular
and its success and how important is it
for more things to be built on top of
the network?
I think right now a lot of
infrastructure needs to be built around
it.
It’s still very greenfield, but it’s
definitely an evolution.
I’m looking forward to watching.
It’s this idea that comes with it.
Is this like what is a Bitcoin and that
that’s a cultural shift that’s
happening.
And so I do think that we’ll see a lot
more people take a look at ruins and,
you know, really just pay attention to
what’s happening there.
As you know, the community drives behind
it and builds the infrastructure to
support it in a way that, you know,
frankly, Bitcoin is supported now.
I mean, I think in this space, a lot of
people potentially watching saying,
okay, well, I’m not quite sure what’s
going to stick and what’s not going to
stick with something like ruins, for
example.
What’s the test that you have for
whether something is a promising piece
of technology, a promising built on the
network versus something that isn’t
going to we’re not going to be talking
about in a year?
Yeah, I think from a tech perspective,
it’s bringing something new, right?
I think there’s going to be a lot of
different tokens that come and go on top
of it.
One of the tokens that I’ve been
watching has been Pops, which is an
earlier community on Bitcoin, large
based, large brands.
They’re taking their time to migrate
from Bitcoin Bitcoin’s older token
standard VRC 20 to this new, more
efficient token standard of runs.
So just like doing some more research,
figuring out what companies are or what
communities are really building towards
something new.
But I think there will be a lot that
don’t make sense in a year from now.
But you know, to TBD, everyone stays or
goes.
But long term it is good for miners
because it increases transaction fees
and miners should be focused on
profitability.
If miners do benefit from transaction
fees, there are other consumers, if you
will, that are the flipside of that that
really don’t benefit from this and are
quite frustrated by it.
Do you think that that dents really the
ability of the adaptability of Bitcoin
right now?
It’s this RUSH Right.
Everyone wanted runes to work and wanted
to figure out how it would work.
I think some of that will subside.
And so I think that we’ll see like a
reduction in the transaction fees that
we saw over the weekend.
But I think the usage of the network
isn’t a bad thing.
Hopefully the fees will be something
that will be usable for everyone to be
able to do.
I think Bitcoin being able to be used
around the globe for, you know, monetary
exchange is still very important.
I mean, I want to just take a step back
and think big picture when we’re talking
about what happened with the having
we’ve spoken to a lot of folks over the
last few weeks who’ve said and reminded
us that after every having we’ve seen
the price of Bitcoin move higher
substantially.
I’m wondering what happens if if this
time is different, if we don’t
necessarily see that, what happens to
miners?
Well, that’s where their operational
piece really comes in here.
Right.
How much is their cost to mine?
How much is their SGA costs?
Those are the two things that I’m
keeping a really close eye on on the
miners that I’m following.
I think those are the pieces that are
going to really make a difference,
because for miners, if you’re not on the
low end of that cost curve, you’re not
going to be able to survive long term.
We probably will see a way like a
certain amount of miners turn off
eventually if Bitcoin price doesn’t
increase because their cost is too high.
So I think M&A activity will also
increase over the next year just because
miners need to find partners or survive.
Yeah, I mean, Amanda, you’ve a great
view on the space.
Give us some names here.
Where could we see M&A?
Who could we see not make it?
I think you’ll see some private miners
try to merge with public miners.
I think you’ll see some public miners
try to figure out how they can have an
edge against their competitors.
The market is pretty saturated now with
over 25 different companies on the
Nasdaq.
So hopefully there’ll be some synergies
where someone has one piece of the
mining puzzle that the other person
doesn’t have another piece.
So, for example, if you have a really
good facility but not capital and you
have a partner who can raise capital,
that’ll be a great marriage.
So I think we’ll see some marriages over
the next year.
And then I think we’ll also see some
people
get in really tight positions and have
to figure out an alternative.
Marriage is a very pretty word.
It could be a little bit of altering
going on as well.
Amanda, when you look across the
industry, you talk to a lot of folks,
you consult with a lot of clients in the
mining industry.
Are there people starting to feel any
pains given that even though you saw
that initial surge in transaction fees,
we’re back down once again and we do
have the rewards now halved.
And I think people have been preparing
for the pain a lot a long time ahead
than they were the last round.
We have more institutional grade miners
this time around than we did during the
laugh out less having.
So the pain I think has been being
prepared for for a while.
We saw a lot of miners pull down on
ATMs.
We saw a lot of miners scoop up assets.
Right.
We saw a lot of miners put in machine
purchase orders for better efficient
machines.
So I think those narratives and those
strategies really help them position
themselves now.
And so now it’s going to be who survives
over the next 6 to 12 months with the
strategies that they put into place.
Things are certainly shaking out.
That is Fabiano consulting founder
Amanda Fabiano.
Now coming up next, we’re going to talk
to Kristin Smith of the Blockchain
Association.
She’s going to join us to discuss the
newfound push for Stablecoin regulation
and why her blockchain association is
suing the FCC for the first time.
And Sam Bankman-fried settles with FDX,
investors putting the blame on high
profile promoters of the brand.
And here’s what Binance’s CEO Richard
Tang had to say about expected Bitcoin
volatility.
Following the having the crypto industry
go through a cycle is is to be expected.
There’s going to be market volatility.
It doesn’t only impact the asset front.
I mean, given the geopolitical tension,
given the interest rate environment that
you’re seeing, the inflationary
environment, the crypto industry is
impacted like other asset classes.
So but we are bullish long term.
I spend basically zero time thinking
about crypto.
I spend a lot of time thinking about
tokenization.
So I would put those two things into
wildly different buckets.
To me, tokenization is simply an access
tool.
It is about using good blockchain
technology to provide an easier access
methodology for particularly retail
investors wanting to access the private
markets.
That was Hamilton Lane Advisors co-CEO
Erik Hirsch speaking with us about his
focus on tokenization.
And speaking of tokenization, just last
week, two senators are proposing a
measure to regulate Stablecoins Cynthia
Lummis, a Wyoming Republican, and
Kirsten Gillibrand of New York Democrat
Lummis saying now that passing this
bipartisan solution is critical to
maintaining U.S.
dollars dominance and making sure
certain US certain certainties in the US
remain the world’s leaders in financial
innovation.
We’re going to discuss D.C.
legislation and other legal issues in
crypto with Blockchain Association CEO
Kristin Smith.
What are the stakes here?
We’ve been waiting for the Stablecoin
legislation to kind of make it through
Congress for a while now.
When you look at what’s kind of finally
hitting the tape and the agreement,
you’re starting to see form around it,
how does it set the stage for
Stablecoins, particularly back to the US
dollar moving forward?
Yeah, well, Stablecoins are one of those
issues where you have a centralized
issuer that is minting tokens and having
dollars to back up those tokens.
And so we think it’s really important
that we do get legislation done in this
space.
We’ve seen a couple of bills.
Patrick McHenry passed one through the
committee earlier this summer.
Lummis and Gellibrand have brought some
new ideas to the table, and we’re in the
process of providing some feedback to
that legislation.
But I do think it’s important because I
think both in the Trump administration
and Biden administration, the
president’s working group, has
identified that this is a gap in the
federal government’s authority.
So it’s really the job of Congress to
step in here.
And we’re encouraged that the
discussions are ongoing.
And hopefully if we get something done
that is workable, we will be able to
have a framework that will allow the
innovation to continue here in the
United States.
How would you respond to skeptics out
there, including Sherrod Brown,
Elizabeth Warren, who say that consumer
protections just aren’t there with this,
that.
Yeah, well, I’d say they need to step in
and enter some consumer protections.
So Stablecoins is one of those where it
doesn’t really fit neatly within the
existing banking framework we have
today.
Right.
These are assets that are supposed to be
100% reserve, not a sort of fractional
reserve type system.
So we need a unique and special
framework.
So yeah, I would say to them, yeah,
they’re right that there are pieces of
the ecosystem, that there are gaps and
we need them to thoughtfully think about
how to step in and fill those gaps in a
thoughtful and workable manner.
What about questions about the impact
that this would have on the broader
financial system here in the US?
Yeah, well, I think, you know, this
should not have a systemic risk, right?
These are assets, again that are 100%
reserve.
This is very different than with the
banking system.
But that being said, we want to know
those reserves are there.
We want to make sure those reserves are
being made up in a way that’s
responsible.
And so, yeah, we we do need Congress to
step in and take action to move forward
on Stablecoins Why wouldn’t the
Stablecoin industry be regulated more
like money market funds?
Well, today the register, they’re
regulated as money transmitters, right?
And so there is a state framework where
they get money transmitter licenses.
They’re also registered as money
services businesses
with with the Treasury Department.
So there is regulation today.
But this regulation was not meant for
this stablecoin for this digital wrapper
around a dollar.
We really need kind of a fresh look at
this.
And so we’re excited to see that
Congress is taking an interest and are
very eager to provide feedback on the
new proposals that have been put forward
about the playing field.
It’s interesting because there’s a
debate under the surface on who kind of
wins out the game.
If this were to kind of meet the tape,
as we’ve been talking about, is it the
likes of the existing Stablecoin players
or does it create a path for more
traditional financial services players,
the JPMorgan’s and BlackRock’s of the
world to be dominant in a stablecoin
world?
Yeah, well, you know, this is a spot
where you have to have crypto expertise
in order to make stablecoins.
And so Circle is one of the great
companies here in the US that is doing
that.
And so I think, you know, going forward,
competition is good, rate choice is good
for consumers and there might be a role
for banks who want to step in to join
this space.
But I think we’re also going to see a
lot of more crypto native sort of
companies emerge.
And so, yeah, I think competition is
good and the more players that want to
be part of it, the better.
Okay.
Well, I want to talk about the lawsuit
that Blockchain Association filed today
against the SEC, essentially challenging
the SEC’s view of who and what is a
dealer.
What’s the issue that you see?
Yeah, so the FCC finalized a new
regulation called the Dealer Rule
earlier this year.
And the problem is the FCC went forward
and basically tried to do a very
expansive redefining of what it.
Seems to be a dealer.
So this is problematic for traders who
are trading on their own account that
might get pulled into this regulation.
But in the crypto world, it’s
particularly problematic for
decentralized finance.
You know, decentralized finance, we’re
trying to replace intermediaries with
software code where there is no customer
and client relationship.
A person could just go SCO simply
interact and make a transaction on their
own behalf.
And so with the dealer rule, it is so
vague.
And the SCC made no attempt to answer
the questions that the crypto industry
had in the comment making process that
we think that this violates the
Administrative Procedure Act.
You know, the SEC has laws that they
have to comply to with as well, and I
think the AP is one of them.
And so we’re hoping that the court will
find that their action was arbitrary and
capricious and will, you know, sort of
pull back that rules that the FCC pushed
forward in a very unclear and vague
manner.
Maybe paint a picture here of what
happens if the SEC is able to succeed
here with this rule.
Well, I mean, in some ways they have
succeeded, right?
I mean, they have finalized the rule.
And I think the problem that we have
right now is that market participants in
the crypto space don’t know how to
comply and in many cases can’t even
comply.
And so we’re seeing this when I talk to,
you know, we have nearly 100 companies
within our association and the
blockchain association.
We’re talking to members.
They’re holding off on hiring in the US
right now, or they have new products
that they want to launch on top of
blockchains, and they’re waiting to see
what happens with the election, what
happens with the FCC, because the
uncertain environment is problematic for
innovation.
And so, you know, our hope is that, you
know, our lawsuit there’s also another
one out there that the Managed Funds
Association has led on behalf of the
hedge funds.
You know, we’re hoping that these
lawsuits will slow the FCC down from
being able to move forward with
enforcing this rule, and we’ll force
them to go back to the drawing board and
reconsider some of the unique elements
that, you know, crypto technology has in
the trading space.
Very, very briefly, 20 seconds, who’s
better for the crypto industry?
Who’s better for the Blockchain
association, President Biden or former
President Donald Trump?
Oh boy, that’s a good question.
I would say RFK Jr.
Is probably my best answer.
But you know, i think right now we’ve
seen Trump become more neutral than he
was in the last administration.
You know, Biden is has been really
challenging largely because of the
people that he’s appointed in his
administration.
So, you know, we hope we get a fresh
shot either way next time.
But, yeah, certainly going to be an
important election for the crypto
industry.
Can I have to leave it there?
Blockchain Association CEO Kristin
Smith, thanks so much.
Well, coming up, the details of Sam Big
Minute Friends, a new settlement with
investors and Access, all the latest
data and news on crypto.
Check out our wipe.
Go on the terminal.
This is Bloomberg.
Now the latest in the saga, because it’s
still going, if you could believe it.
Investors now have agreed to drop claims
against Sam Bankman-fried as part of a
settlement that puts the blame on high
profile celebrities, sports stars and
social media influencers who promoted
FDX to investors and customers.
Bloomberg’s Ava morrison reported on
this.
She joins us now.
Why are they agreeing to drop this?
They’ve said that they think that Sam
Bankman-fried could be more valuable to
their case than going after him with
potentially protracted and uncertain
litigation as part of his agreement with
customers and investors.
He’s agreed to cooperate with them in
their case against some of the other
defendants who you’ve alluded to before
Larry David, Tom Brady, other social
media influencers as well.
So Sam Bankman-fried has agreed to hand
over any documents he has and help them
help him help them in any way that he
can.
Larry David and Tom Brady never thought
we’d be talking about those two on an on
the crypto show.
Hey, I want to shift gears a little bit
and talk about the founder of Finance,
because you’re actually headed to
Seattle next week for sentencing ever.
Remind everybody what’s at stake here
and specifically what’s at stake for
what could happen.
He could potentially face up to 18
months in prison.
So taking it back a couple of steps last
month, last year, he was charged with
banking law violations.
He pleaded guilty and he faces up to 18
months in prison.
This was the culmination of a really
lengthy DOJ investigation into Binance,
whether it was accepting U.S.
customers on its non-U.S.
exchange and whether it had proper
protections and compliance to protect
the exchange against sanctions
violations as well.
So, you know, we’re keeping a close eye
on that, and I think everyone’s eager to
see what the result will be.
And we’ll certainly be keeping a close
eye on your reporting from Seattle over
the next week.
That’s Bloomberg, Ava, Benny Morrison
joining us.
And one more story that we wanted to
share before we go.
A legal pad that went viral back in
2017.
You remember this?
It’s now selling for six figures online.
The notepad with the words by Bitcoin it
scribbled on it is currently fetching
bids of more than 46,000 in an
auction.
It was seen behind then Fed Chair Janet
Yellen during congressional testimony
almost seven years ago.
The bidding for the ink drawing is
slated to end late on Wednesday.
And if you could believe it, of course,
at the price that it is now looking to
fetch is actually more than double the
current price per Bitcoin.
How do we know that’s the real sign?
You want to know?
That’s a good question.
Legal pad you would have to have what do
you call it?
Somebody that maybe turns the the way
that you track, you, you transcribe.
Maybe there should be like an NFT to
authenticate its authenticity.
That’s true.
I bet you can.
Griffin will not be bidding necessarily
for that one.
All right.
A couple of Bitcoin right now.
That’s how much it’s going to cost.
Yeah, exactly.
Maybe just trade in your bitcoin.
Well, anyways, that does it for
Bloomberg Crypto today.
Join us again next week, same time, same
place.
This is Bloomberg.
“Bloomberg Crypto” covers the people, transactions, and technology shaping the world of decentralized finance. Today’s Guests: Fabiano Consulting Founder Amanda Fabiano and Blockchain Association CEO Kristin Smith
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