Bloomberg Crypto 04/30/2024

Live from Bloomberg's world headquartersin New York. I'm Sonali basak, and I'mTim Stenovec. Welcome to Bloomberg Crypto.A look at the people, transactions and technology shaping the world ofdecentralized finance. Cryptos Richest man Binance Co-Founderfounder Changpeng Zhao learns his fate today in a US court.Proceedings underway this hour as he faces up to three years in prison foranti-money laundering failures. We will speak about the case and theprice 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 cryptoETFs. And Australia is potentially next.The details up ahead. All that and more over the next halfhour. First, though, a snapshot of the marketand a lot of red Bitcoin lower today and down for the week so far, 8.5% over thelast seven days. Jan, always going to have more in just asecond 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 thismonth 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 closeto 6% on the day it's ahead of earnings.

Tomorrow, investors likely will belooking for commentary about how the recent having has affected the companygenerally. Let's look at this month that Bitcoinhas had because what a ride we have seen.It's on pace to post its worst month since the collapse of FTX in November of2022. Yet we have not seen anything like andafter its collapse, the US ETFs, remember, took Bitcoin to a record highof almost $74,000 in March. But the demand for this risky asset hasbeen waning. And if you take a look here, you do seea significant drawdown here.

The question, though, now, Tim, becomeswhether this is a new buying moment for the market or whether it signals morebearishness 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 forChangpeng Zhao, also known as C Z. We heard that from Sonali, theco-founder of Binance, now former CEO. The exchange, though, is the largest inthe 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 ofBinance 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 richestinmate 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 goingto be something more muted? I think it's a really important contrastto draw as you look at these two.

Individuals.Sam Bankman-fried, who really flouted the law, obviously was out on bail andthen remanded to jail during the course of his trial, remains in jail here inBrooklyn, 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, Ithink, in a lot of people who watched that sentencing hearing just a few weeksago, even when he was given the opportunity to speak and address thatcourt, he didn't apologize explicitly for what happened at FTX and to peoplewho lost vast sums of money. CZis a different case.

We look at the filings that have beentendered 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 thatSam Bateman didn't. I think that's what's really interestingabout this, and I think it's why he's kind of pinning his hopes on here duringthe sentencing hearing is that he clearly traveled to the United Statesfor these proceedings to take place. He's been out on bail, of course, buthe's been trying to go by the letter of.

The law, at least at this stage of hislife, and accepting responsibility for what happened with him and withBinance's famously. Come on in here.What is the Department of Justice strategy here and what is his strategyin terms of defending himself or his punishment?The Department of Justice here is really just trying to send a really strongmessage. Like you guys mentioned, this is one ofthe most powerful figures in the crypto world, Binance being one of the largestcrypto exchanges. And so what the Justice Department wantsto do here is deter this kind of.

Behavior from happening again.So even though for the charges that he's facing, the sentencing guidelines arearound 18 months, the Department of Justice is actually asking for doublethat. So really, the sentencing that we'regoing to be experiencing later today will showcase how tough the judge wantsto be on someone like this. Well, what's next, even after thesentencing, 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'sgoing to happen to the monitor that Binance agreed to hire as part of thisdeal with the DOJ to essentially ensure that everything isworking properly. We don't know yet which monitor it willbe, what law firm will take that role. And the Justice Department hasn'tdisclosed that. But once that all wraps up, you know,Binance is sort of, you know, now done.

With sort of having any more legalproblems. And we'll have to sort of see whetherany 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 Binanceover the last year, despite the legal troubles that season has had.Why do traders look at Binance differently than they look or looked atFTX? That's a great question.I mean, you look at what's happened here and what King has pleaded guilty tothat's not having this kind of money.

Laundering anti-money laundering systemin place. He obviously didn't plead guilty to, norwas he accused of taking money from customers.And I guess that's the distinction here, that there still is some faith in theintegrity of this company, which, as we've seen described in legal filings bythe CFTC in the SEC, is this really sprawling web, this giant network ofcompanies. I think that's going to be very closelyscrutinized, talking about sort of what happens next here and how Binance islooked 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 directorsthat includes many friends and colleagues of SEISS.So I guess an open question is sort of what influence does he or his philosophyor 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 ofbusiness. Really extraordinary reporting by ourcolleagues 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 usedaround the world.

So it is astonishing and still a companythat'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 USlegal 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 managingpartner Seth Ginns You know, Seth, with what's been goingon in the crypto industry, we've kind of started off the show talking about howthe drawdown in Bitcoin has been the.

Worst last month since you've seen sincethe FTC's collapse. But you haven't seen anything like theFTC's collapse. Why do you think the sentiment is sonegative and do you think issues like this still keep some people fromentering the market? I'm sure keep some people.I don't think that Binance per say and sentencing at this point are keeping alarge number of people out of the market.I think what we've seen here is the ETFs, which created a new avenue forengagement and have been wildly popular, much more popular than I think anyone'sexpectations.

That led to Bitcoin moving up veryquickly, much further than would have been anticipated with what was happeningin the macro environment. Now, we've had yields come back up tonear their highs from last fall. We've had the dollar start toappreciate, again, back toward its levels from last fall.And we're still materially above where we were at the start of the year forBitcoin. So we've seen a very nice continued bulltrend for for Bitcoin, despite the fact that a lot of the the macro dynamicsthat 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'twant real yields to move much higher. We're talking about keeping rates at ahigh level rather than rate increases right now with inflation showing alittle bit of a resurgence. So I think real yields are coming downand 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 conferencetomorrow. What happens to Bitcoin?Well, I mean, it's interesting.

I'm starting to hear people ask whetherwe're going to get a rate increase tomorrow, which I think is veryunlikely. So I think anything short of a rateincrease is likely to drive some degree of a relief rally because, again, you'relooking at inflation showing a stickiness while at the same time ratesare not likely to to move up. And again, expectations are starting tofactor in at least some degree of a belief that there could be a rateincrease 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 betweenBitcoin and broader crypto and real yields.So if if we think we're in an environment where the Fed is going tohave to raise rates in order to bring down inflation, we would expect that tobe a headwind for Bitcoin's price. But what we're seeing is a little bit ofthe 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 alittle bit longer, which in fact.

Actually brings down your your realyield. So we haven't seen a breakdown in thatinverse 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 Fedtalking 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 todaywhen it comes to see for the folks who are still on the sidelines right now andthey say to themselves, you know what?.

Crypto is really only good for moneylaundering. It's really only good for criminals.And they read a story like our Big Take today, which talks about the US TreasuryDepartment asserting that finance failed to prevent and report suspicious tradingby Hamas, al Qaeda and other groups. Perhaps those people are still on thesidelines now. What would you say to those folks whosay, okay, well, I still don't see the use case apart from money launderinghere. So I think there are a few things to tofocus on. One is we've now had the government, theUS 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 beingcleaned up. Bad actors or actors that weren't takingthe 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 areoperating in a very transparent way, but when you think about the commentarythat's coming out about illicit funds, the illicit fund commentary is becausethe blockchain is transparent.

So I can guarantee you that there are alot 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 theblockchain is transparent. There are a number of companies that doblockchain forensics that allow law enforcement to actually track thesemovements. Still a lot more on that to come.Coin Funds. Adkins, we thank you so much for yourtime. Coming up next, we're going to talk toLee Drogon from Starkiller Capital to.

Talk about the catalysts he's watchingnext for the crypto industry. Plus, Hong Kong debuts a batch of cryptoETFs as regional officials are hoping the crypto will help to restore thecity's reputation as a modern financial center.And last week, I had a chance to sit down with Cantor Fitzgerald CEO HowardLutnick about Stablecoins, and he had some strong words about their future inthe U.S.. Americans should have nothing to do withthese 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 forAmericans. We have no business being nearStablecoins. I think the bigger point we're going tosee longer term is a wave of tokenization and defi activity onbitcoin, 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 anecosystem with a multitude of apps and other native assets that can be built ontop of it. That was Amanda Fabiano last weektalking about ruins and the next catalyst for bitcoin following thehaving.

Let's bring in star killer generalpartner and CIO Leigh Drogen about this because you know Lee even if you wereexcited about the having you've obviously seen Bitcoin fall offmeaningfully 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 thatfirst day of excitement. So how do you think about the potentialhere and when things will finally turn around?Well, I think your previous guest, Seth Jones, you know, put it really wellhere. We're in a bit of an interstitial periodduring what is a primary bull market.

And during, you know, all of theprevious 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, theliquid token universe. And we're not seeing a serious breakdownin any of the models that we run here. Bitcoin specifically, that $60,000 levelalso happens to be the volume weighted average price from the bottom after theETF approval. So, you know, as long as the marketdefends 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 stopafter 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 incrediblystrong and needed a pretty, you know, significant pullback to reset.But, you know, in in kind of markets parlance here, it seems like we areconsolidating over time instead of price which after the run that we've had is apretty good sign. Lee, what happens, though, if the marketdoesn'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 socertainly 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 movingaverage 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 wherethe support after the ETF, you know, would come in and then we'd have a muchmore 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 todayis because I know that you bring math to the equation here.You take a look at this from a.

Quantitative perspective, and it feelslike sometimes from the outside that you're looking at people trading Bitcoinand 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 canreally stop the selling pressure at this point?I mean, I don't know if this is the answer that anybody is really going towant, but the the honest answer is there is no floor to any of this stuff.Right? There's no real price to sales or priceto earnings ratio here.You know, these are these are assets.

That are based on a very long horizonview of growth. And at any given time, those assets canbe 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 orderof 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 reallylook like you should be throwing a ton of fundamental sell pressure on an assetlike Bitcoin right now for Etherium and some of the other altcoins here rightnow.

Obviously, the SEC is at war with withthis ecosystem and that, you know, that has taken a little bit of the wind outof 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 andAustralia prepares to approve them. This is Bloomberg. Today, Bitcoin and Ether ETFs begantrading on the Hong Kong Stock Exchange. Bloomberg Intelligence Estimate thefunds 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 digitalasset hub. Today marks the launch of three spotBitcoin ETFs in the city following Wall Street ones in January, but also thestart of a trade for three spot ether ones, which is notable given that timeis 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 currentlyprohibited by Beijing on the mainland. The type of demand that we can expect tosee there is question marks over that. Bloomberg Intelligence, for instance, issaying 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 00million on the first day and actually the demand could go a lot further fromhere. Hong Kong has a very specialposition as first as one of the most prominent financial hops in the worldand the second highest SARS region of the second largest economy.Where we get to depends on a lot of.

Different factors, including whetherthese spot crypto ETFs could ever become eligible for the ETF Connect program togive access to mainland Chinese investors.There's also the question of whether we can expect further products down theroad, and that was something the Hong Kong Stock Exchange said that they'relooking at. We can continue to go into the physicalspot assets, maybe composite types of products, eventually getting into maybeleveraging inverse types of strategies. The first step of what could be severalto 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, Australiaregulators 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 behindJanet Yellen. This sign was flashed by an intern onCapitol Hill back in 2017. Personally, it just sold for more than,000,000 in an online auction. The winning bid made by an anonymousbuyer 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 millionwas 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 isworth 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 oncrypto on see our wiki go on the terminal.This is Bloomberg.

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