Today crypto markets plummet as Russia launches an all-out invasion of Ukraine ftx CEO Sam Bankman freed explains how automatic trading could deepen the sell-off. All eyes are on ukraine after russia began its full-scale attack of the country overnight for the latest updates on all that’s happening in the region you can head over the conflict is spooking crypto investors who are turning away from risky assets the overall market tumbled more than seven percent by noon eastern. Conclusion of Russia Ukraine cryptocurrency
Bitcoin fell seven percent and dipped below thirty six thousand dollars ether took a ten percent loss xrp also fell around ten percent to about 65 cents per token we spoke to bkcm’s brian kelly and arc as chief investment officer jeff dorman about what’s keeping crypto prices under pressure you have traditional hedge funds macro hedge funds that have been using bitcoin as a pro cyclical inflation hedge and that that pro cyclical is key it means if the economy is doing really well and there’s inflation bitcoin is your hedge now what’s happened is the economy slowed down the fed has told you hey we’re going to try to crush inflation therefore you don’t need those hedges then add on to it now we have russia and the war in ukraine that is likely going to slow.
One key variable in the Russia-Ukraine war: cryptocurrency
The global economy um it will spike i mean it already is spiking energy prices and spiking inflation so then the real question for bitcoin and crypto and it’s trying to solve that right now with this action is whether or not that inflation spike is going if bitcoin’s going to be a good hedge for that right now it’s really just being used as a 24 7 levered vix you know the side effect of everyone cheering about institutional adoption over the last 18 months is that when you have a lot of traditional hedge funds and even some private equity and venture funds in the in the non-digital asset world piling into assets like bitcoin and ethereum even solana.
Well that’s the first thing that they’re going to sell when you have tensions high because it’s 24 7 and it’s liquid so we’re seeing a really big decoupling right now um and it’s really interesting because if you go back two years ago when you had the iran uh missile uh invasion bitcoin actually rallied now ftx ceo sam bakeman freed weighed in on the selloff via twitter he pointed to algorithmic investors who trade bitcoin based on the performance of the s p 500. with stocks selling off today those algorithmic traders are also selling bitcoin cnbc’s kate rooney recently spoke to him about the continued volatility and how that automatic trading could worsen the losses joining me.
Also Read– What is digital rupee? And how will it work?
How Crypto May Help Russia And Its Billionaires Go Around Sanctions
U.S. President Joe Biden said Thursday he has authorized “strong sanctions” in response to Russia’s invasion of Ukraine. These aim to limit its ability to do business in dollars and other major international currencies, and include penalties on five Russian banks that represent an estimated $1 trillion in assets. A broad swath of Russian elites and their family members will also be targeted. That’s all in addition to penalties that were imposed earlier this week.
Now sam bankman freed ceo and co-founder of ftx sam great to see you thanks so much for being here of course thanks for having me i want to ask you about bitcoin we’ve seen the price now around 38 000. it’s been a tough year for cryptocurrencies uh does that factor into your top line and there’s a slowdown in bitcoin prices bad for your business so i mean i think the first answer is just absolutely like it does factor into our our our our revenue and um you know in general i i think thinking of of you know volume is proportional to prices like a decent first order approximation um and uh and so i think that like that drawdown does have impact it’s worth noting that there’s also been more volatility which is um push a little bit in the other direction you know right now i think our sort of like 20 22 run rate so far has been slightly higher than our 2021 average uh.
How Crypto May Help Russia And Its Billionaires
Russia–Ukraine War: Cryptocurrencies may help Russia and its billionaires blunt the impact of western sanctions.
You know p l was um so so i think things have still been trending slightly up um but but i think a lot less growth than we otherwise would have seen one thing which i think is like relevant to note here though is that this is not really a crypto specific move um and that’s different from some previous times when we have seen crypto acting pretty idiosyncratically um if you look over the last few months equities are down a lot um and and i think it’s been sort of a a two um you know two major factors the first and the biggest by far is monetary policy um you know there are now significant expectations that because of inflation.
You know the fed is going to uh start to take up interest rates and and and that’s going to have you know probably pretty big impact um on uh on on on what we see like i i think on the margin you know that’s that’s just gonna be decreasing balance sheets um it’s gonna be like less by pressure it’s gonna be you know effectively you know cause you’re like curbing inflation in the us dollar and um and so i think that’s one piece of this um that that i expect to be real um and i think the market is pricing quite a bit and i think that’s that’s led to a big drawdown encrypt but i think it’s also led to a big drawdown in equities especially the sort of growth tech equities that had been growing a ton during covid um the second thing.
Russia-Ukraine Crisis: Cryptocurrencies
Which is more recent is just the ukraine situation uh which i think has has put a lot of fear into markets um i think it’s not obvious what the long-term impact of that is going to be on crypto i i think that that in particular you you could make an argument for why this increases the demand for crypto and can bitcoin break away from that correlation if that’s the case if you’ve got these traders that are really like you said a black box they’ve got their model and they buy and sell based on some of those macro factors can bitcoin get away from that i mean is that a barrier to bitcoin decoupling from equity markets it’s a barrier but it’s not a strong barrier like it’s this kind of thing where like what you sort of expect to happen is imagine that half of all market participants.
Just look at historical data and the other half are sort of like thinking just about macro and and and economic fundamentals the the first half is still assuming a you know 80 correlation between crypto and equities the second half now thinks zero correlation or like isn’t even sure what direction the correlation should be in right at the beginning you’re still going to see a very positive correlation because you have two parties one of which is running a very positive correlation and the other which is running zero but it might be less positive you might see the correlation start drops like 60 um and then what you’d expect to happen after that is the people running historical studies will update their models right.
Ukraine-Russia Crisis: Crypto Playing Key Enabler for Both War-Hit Economies
They’ll be like oh interesting like seems like the correlation is decreasing right and so their models will have like start modeling lower correlation and uh and then the empirical correlation will go down because their models are having impact on what happens in the world and and you might actually get kind of a snowball where slowly sort of the the observed beta in the market the observed behavior exponentially basically decays down to sort of like the new fundamental economic expectations over time i’m not saying that’s like exactly what’s gonna happen but that’s like one model.
You could have whereby like on a time scale of maybe like six months or so um things would update to being more in line with what i you know with sort of like macro thought and less in line with with sort of like sale historical models got it okay really interesting it’s great to get your perspective on that and i think there’s a lot of people just curious to really what’s getting in the way of another bitcoin bull market is there anything else you mentioned the macro factors and some of this automatic trading that needs to happen before there can be another step function higher for cryptocurrencies.
Ukraine legalises cryptocurrencies amid soaring tensions with Russia
Idon’t think there’s anything that needs to happen um but i think there are some things that would help quite a bit um and by far the biggest thing here is regulation and in particular the u.s regulatory environment like if you look at the largest trading institutions um what are they waiting for you know what are banks waiting for to get involved i think it’s basically entirely clarity on the regulatory side right these are institutions which are used to assuming that whatever fees happen they’re gonna get the biggest and the first
You know they’re gonna have the most regulatory scrutiny on them and they want to be confident that they understand a system before going in perfectly and so even just sort of like some amount of uncertainty in the regulatory environment is enough to scare them and make them feel not super comfortable getting involved and i think that’s a lot of what’s going on right now is just like a number of institutional players are are feeling nervous and are sitting on the sidelines waiting to see what happens um but would like to get involved and and will get involved if they feel like they can do so in in a safe way.
Minutes after Russia invaded Ukraine, these crypto ‘safe havens’ tanked
I think that’s gonna happen i think it’ll take time but i think it’ll happen and so uh you know i sort of expect that like over the next year or two there’s gonna be enough clarity that more institutions will come in but it’s going to be a trickle it’s not going to be a delusion not all going to come out once it’s going to be a long process for them uh but but but but i do think that like regulatory pathways are probably the other biggest barrier to adoption right now and and again i’m optimistic that that’s going to get better.
Before we go we’re also keeping an eye on coinbase earnings which come out after the stock market closes shop today here’s how that company could use the metaverse to fend off a slowdown in trading coinbase shares are down today ahead of earnings the crypto exchange reports after the bell tonight share price has been struggling lately it’s down more than 30 percent this year and has been trading below.
Its ipo price it’s also been underperforming bitcoin prices lately fourth quarter results are likely to reflect that lull in crypto markets which has weighed on investor sentiment and trading activity wall street analysts do expect strong trading volume for the fourth quarter which we’ll get tonight but they are seeing a slow down in the current quarter q1 its trading volume is publicly available.
Conclusion of Russia Ukraine cryptocurrency
So a lot of that tends to be priced in but the bold case for coinbase is in its role in what some are calling the bank of the metaverse and coinbase really leaning into some of the financial services beyond just crypto trading and for many this is a multi-year investment analysts are looking for growth beyond trading revenue and things like custody side of the business lending something called staking as well and action on the institutional side of that business that’s all for crypto world today but we’ll be back again tomorrow so we’ll see you then.