Crypto Through a Global Macro Lens - TOKEN2049 London 2021

good afternoon everybody welcome thank you it's my great pleasure to be moderating that panel here crypto through a global macro lens crypto i think is macro bitcoin is macro we've heard it many times today and yesterday that it now appears on bloomberg on cnbc bitcoin is really everywhere but what does it mean so many interesting questions so happy to welcome christoph john will and simon and maybe we start with a round of introductions what piqued your interest in crypto how did you get into that space i always find that very interesting because most people are not crypto natives they make the tradition from tradfi into crypto so simon start with you how did you get in that space oh wow um so my background is uh options trading i've been uh trading 20 years fx options being preparable in stand chart um and it's just getting to be a very dull place uh whereas uh crypto options are uh are um very exciting fast moving it's got everything that's uh that a trader looks for in the market you know there's opportunity there's growth there's uh and and there's lots and lots of flow so for me it was a uh it was a natural choice to make the jump over um i did a few years trading pa for myself and then i was invited to uh to come and join qcp capital which is uh one of the leading option houses for uh for crypto assets uh hi my name is will petes uh cio of 100 acre ventures um in terms of how i got into crypto really started lending cash on bitfenix about six years ago because it's attractive yields that's really what piqued my interest um and then you know from there kind of the rest is history i worked at a global macro fund for the better part of seven years which took also a big interest in in crypto and then have been managing uh crypto formally for the last five years sure so uh john cheeseman institutional sales at ftx um i really so i spent about 15 years working in wall street and foreign exchange um crypto i suppose is pretty close to a currency um i just you know when i looked at it in 2016 you could just see from trying to think about total address addressable market look at something like remittances and say well if just a small amount of people start seeing uh the opportunity in the use case for for bitcoin the potential for this to be you know a hell of a trade is is pretty asymmetric so that's how i got into it went down the rabbit hole found my day job a little bit on the boring side like simon i guess and uh you know decided to uh to to take the leap hi everybody my name is christoph de la salle so i'm the director of institutional business finance similar background to uh to john traditional finance um banking and and hedge fund trading uh but i actually stumbled into crypto through fintech so uh back in 2016 uh we started to work i guess we call them the sort of initial uh iterations of crypto hedge funds i mean back then anybody who had made 500k and crypto wanted to launch a hedge fund uh the landscape's a little bit different now uh so it's been a few years now that i've been on the on the institutional side of crypto great so let's set the macro scene sovereign debt going through the roof fiat currencies debasing maybe not but people here in the room probably say they're debasing inflation probably isn't transitory uh interest rates are zero negative i mean german yields where i'm from is kind of like negative to the 10-year 20-year point something like that implant volatilities are super low it feels like there's a rubber band that's stretching and at some point something bad's going to happen then you have gary gensler who's becoming increasingly uh outspoken about crypto regulation the united states so stuff's moving at the same time we have that asset or it's not just bitcoin it's the assets you know depends on what you want to do would you want to start with just bitcoin or is is also ether for institutional investors is it cardano i mean where do you where do you start where you stop i don't know but it's still this asymmetric trade i think that you can size appropriately you can be long so simon why do you buy bitcoin where do you think that all fits in where where are we um i'm just i'm just a simple trader so i like to think of things uh you know sort of in the context of um fx and for me um crypto is not an asset class it's a um it's a whole ecosystem it's a uh it's a country it's a country that's got a lot of different financial instruments so you can trade we've got a lot of different coins of which btc is um is just one of the uh benchmark instruments that we use to uh to trade but really what we're trading is the whole digital economy in the same way that um you know you might buy real or tie bar because you want an exposure to that economy and because of the growth that you see in that area i see um btc as the entry point into the uh into the new digital economy and this and this isn't just a regular country we're talking about right we're uh this is an extremely fast growing high growth uh energetic area um so for me um btc is just the start of it but really what we're looking at is a whole uh world of instruments all fitting all playing a different part inside that our country you know we've got we've got the bonds we've got credit with all of these aspects and most excitingly all of these different new instruments in the form of d5 and you know perpetuals and things like that this is where the real fun is i suppose one of the developments this year has been actually that there are now multiple entry points btc you know traditionally has been the first stop for everyone um but i suppose the most obvious one now is now with nfts um people are finding their way into the digital ecosystem through those through stable coin lending and then through ethereum now as well which i think is you know one of the biggest developments of of 2021. i think from a macro perspective i think the market's starting to understand that crypto is effectively a pressure release valve for the entire economic system right i think you know what it's funny when people talk about crypto being manipulated or that's one of the concerns of ginsler but in reality you know we have structural manipulation across the entire financial system whether it's printing of dollars suppression of credit spreads whether it's a true manipulation like libor and because you know bitcoin and digital currencies are peer-to-peer it allows for a much purer market like actual true market efficiency um and i think the the crypto market is finally coming around to that so in 2017 2018 everyone's saying oh you know crypto's benefiting from easy monetary policy people going out the risk curve i think that's certainly true i think now it's becoming because it's matured and you're seeing a lot of different applications and use cases and it's easily accessible lots of fiat on-ramps um it's it's kind of taking on a much more important role and you know we'll see if correlations continue to break down but recently over the last few days it's been interesting to see at least in the us market a lot of weakness while bitcoin trading well um so so i think the market's coming around understanding its role um you know as a macro investment vehicle maybe just to add to that i mean if you're a macro pm you know your job is to identify and then capture big trends you know crypto is you know the trend the exponential trend on and beyond macro performance managers you have other performances i can see that that's where the returns are at the moment and you know if you just look at the price all the information is in the price if you look at sort of uh the context of you know extreme bearishness the price floor is just going up year after year uh 2011 it was two dollars 2015 200 then 3 500 maybe this year will be 30k um so you're just going to see the you know sort of exponential rate of adoption sure for my from a trading perspective if you're a trader i think trading the crypto market is absolutely fantastic if you're trying to compete against other traders in arbitraging s p volatility that's a tough game there are you know a handful of specialists doing that but the amount of alpha that's in that market is is pretty small yeah whereas in crypto um it is presumably larger and some of the say trend systems relative value trades they still work there but not not everybody is there not everybody's doing that right it's kind of like it opens the space up for people like us even the you know the single man single woman to trade in these markets but speaking about the larger participants you've just mentioned the release valve will how can how can institutional investors get access to that release wealth because i think i think they probably want it but they fear that they may be doing something wrong we've seen it on the corporate balance sheets microstrategy and so on but i've yet need to hear about a big pension fund or a sovereign wealth fund having an allocation to bitcoin maybe you know of some that do and and i'm misinformed but uh i don't know that there are any we had a mass mutual i think was probably but for the treasury right yeah yeah yeah i i don't think for their clients not for their pension clients yeah i mean thus far in the u.s i think most of the dollars from traditional institutions has gone through venture funds so a16z paradigm you know funds that have a long history and pedigree have been quote safer for institutions to invest and allocate to i think it's been a slightly slower pickup on investing in hedge funds um just because of operational due diligence things like custody you know institutions still getting their head around but what previously was more of a career risk and headline risk i think has dissipated i think it's been much more accepted now for you know fund uh institutions to make an allocation and then in terms of my own you know recommendation to these groups i think there's a couple of core assets that you could own passively and there's increasingly more vehicles to do that and i think similar to hedge funds in the you know 90s and 2000s there's a tremendous amount of opportunity you know to outperform given just the volatility the informational asymmetry etc so like if you look at the hfri indices that track hedge fund performance you know they greatly outperformed the market in the you know 90s and 2000s and then you had this last 10 years of under performance so i think we're kind of in the early 90s from a you know hedge fund an active trading perspective and so a lot of opportunity there if institutions are inclined so it's probably still an educational piece of work that the industry needs to do or um you know market makers exchanges essentially the entire ecosystem needs to do to educate institutional investors better about accessing bitcoin or ether or any of these products because i feel they're still scared they're confused you know they're scared about what a valid is maybe some people get their head around this now but on average on a from fraud or perspective they don't really understand that stuff yet the most common pushback we get is the lack of a kind of brand name custodian where they're like you know we keep our equities at state street we need to be able to keep our crypto at state street and even though there are a lot of very good custody products that seems to that seems to be the biggest blocker that we see yeah but certainly i agree with the education point i think it's been a constant necessity to educate clients i think what's different now again versus a couple years ago as you had last week i think bfa put out a report on their kind of you know view of the entire crypto landscape i mean the fact that pretty much every bulge bracket bank now in the us has put out a report like that is offering it to investors i think clearly there's a bit less friction now but yeah certainly there's a constant education and the space moves so fast it's like if you bought into the digital goal narrative and that's why an institution want to invest that's only clearly a very small sliver of the various applications and use cases that are there so i i see a lot of activity from the hedge fund space in in options yeah these guys are fully involved at the moment they they recognize the opportunities there right and um and you know it's got everything that they love out of a market and hedge funds are typically set up to deal with this sort of uh you know agile flow they could be more flexible they can be faster um so so in my mind they're already there asset managers we're having a lot of conversations at the moment but this is a slightly longer process and absolutely it depends on custody solutions and all of these uh things that you know i'm super excited because uh you know it's all out out the door there the uh the solutions so that's only a matter of time where where i'm where i'm bearish is on banks participation in this space which i think is very very problematic under the current regulatory framework it's uh and although you know there's a serious fomo out there the the gap to get to where they need to be in order to uh properly participate in these markets is is still very very big at the moment yeah it's uh for me it's it's mostly mostly chad there and when they arrive it's it's not even too clear to me what it is that they can contribute to this market my my view is that they've probably missed that train um and it's going to be dominated by the uh the faster more agile uh market makers you know the uh out there and in the same way that banks have missed uh you know aren't involved in cash uh equity market making or cash spot anymore or you know these sort of areas they've all moved to more um agile players i think uh crypto is the same i think you know when we're talking about institutional players you have to split up into two different categories of crypto native guys you know crypto hedge funds pure crypto market makers etc and then you have now the traditional bigger financial institutions entering the space and we if we look at the latter you know as you were saying everybody's at a different part of their different stage of their educational journey some guys are just trying to understand how to work on custody how to buy their first bitcoin uh the more sophisticated guys all have the same sort of entry trade training spot versus futures which is fine but definitely the the educational component is uh you know quite important and then um if you're running your own crypto hedge fund um well actually crypto or you know long short equity raising money is it's a hard gig you know the hit ratio is is quite low you do 100 meetings you know at the beginning at least you get three or four tickets right um it's even harder when you're you're trying to pitch your your crypto hedge fund because not only do you have to sort of answer the you know okay but you know what is your edge type questions uh quite often you have to uh educate these uh these investors so family offices fund the funds on uh sort of the how crypto works you know what is bitcoin etc so different uh different uh components take into account you just mentioned the banks simon uh my personal opinion is you i think you've said they probably will miss that train uh maybe at some point some of the banks will be purchased by a crypto firm or maybe it's going to be the other way around because they may be fighting against crypto and then eventually lose that fight um and you will i think you mentioned digital gold which is kind of like a narrative that a lot of people use because it's it's easy to get to right it's easy to get to that 500 550 k per coin and and have the equivalent market cap of gold and then what you often hear is yes but bitcoin is too volatile it's substantially more volatile than gold 85 percent implied volatile or something like that but is that really a fair argument uh given where we are in the journey of bitcoin because going forward you could maybe come up with an argument that bitcoin's volatility is supposed to be decreasing as we move along and maybe be on par with gold i don't know but even if it isn't uh you can always position size accordingly nobody is forcing anybody to put 10 20 30 50 of their assets into bitcoin right if you've all adjusted you can have a meaningful contribution that is diversifying to your portfolio regardless of volatility what do you think well the gold put 2.0 is kind of becoming a bit of an insult because you know gold has been the worst monetary inflation hedge you could possibly have over the last 10 years fair point it's almost like you know i mean i think i think i was reading something that gold's up one percent in the last decade so and you know what's money supply is up 800 percent thousand eight hundred percent probably globally so i mean it's funny isn't it um it is almost kind of you know very difficult i think to justify allocating to to that asset um so i think bitcoin's volatility should be should be a very attractive um proposition given how well it's performed in an invite you know satoshi the white paper it was designed for exactly this purpose that you know there was a huge amount of easing out of the financial crisis when this happens again which it ultimately will um there'll have to be more easing and you know this this is exactly this is exactly what we've seen and it's worked exactly as it was as it was intended to and it gives individuals not just institutions which i think is a good thing access to you know to hedge their wealth against a system that is kind of to some degree as you said at the start you know at or nearing kind of a breaking point sorry to any gold bugs in the audience but i would agree like i think it's it's a helpful narrative because it's easy to understand but it clearly you know undersells the value of the coin extraordinarily i think melton from coin shares is always out talking about this is not a shiny little rock that you're investing in um and i think you know what will help you're seeing a lot of activity right now with you know stride global and the release of of using you know bitcoin for remittance and in el salvador making it very easy user experience through twitter i think those types of use cases that are again also easy to understand using bitcoin as financial rails you know is is kind of the bigger vision and hopefully institutions can start to understand that you know now that it's it's you know being done um i mean i think there's over 3000 btc in terms of the capacity for the lightning network now so those types of use cases as they become like literally happening right in plain sight in front of everyone should hopefully get institutions to understand you know the bigger the bigger picture you know whereas the digital narrative i think was just kind of the easy way in um you know to educating institutions all right 100 agree it's um yeah it's useful if you're explaining it to your mum but uh but you know uh bitcoin is so much more than that it's a productive asset right as part of this uh as part of this ecosystem compared to uh gold which is this uh yeah thing that looks pretty um and and to your your point about volatility um yeah volatility is uh is very high in the uh crypto space um [Music] but in my mind you you cannot have high growth without high volatility right it's a is a very healthy indicator of what's going on in the uh in the whole system it's because you're you've got capital constantly being reallocated across different coins in our you know why because there's innovation all the time new products new uh new schemes new blockchains it's uh so i think it's it's very healthy that everything's moving around so fast you know this is uh you know traditional finance squeezed into uh such a small period of time which of course means it comes with very high volts and and for our um you know for us um you know this is one of our uh our key offerings our uh our customers are able to generate uh nice high yields through uh selling this this volatility um an asset in itself um and generating uh returns there and you know of course like at its very core it's a disruptive financial system so i think your friend raul tells that story quite well you know how could how could that not be a volatile event for financial markets if the incumbents are being displaced which it will be and i think people are maybe scared of volatility for the wrong reasons it's risk and reward as always and um only because it's volatile doesn't make it a a bad asset i mean when you look at what happened in the past 20 years at least from my perspective is that every large investor wanted to reduce the volatility of their portfolios there was a point in time when they were happy with 20 equity vol on their u.s large cap equity allocation they no longer want that they kind of like want to you know dial that down to 15 or 10.

everything needs to be like this all-weather type of behaved thing that works all the time but that is not reality i think i think something like that is going to break be that risk parity 60 40 all these type of things volatility per se is not bad sometimes when you say that then the county argument is well we like bitcoin or crypto because of its decorated nature and the diversification benefit that you can't get when you add it to a portfolio but now it's no longer there the volatility to risk assets is increasing and maybe that is true when you look at like the past couple of months that there has been an increase in correlation over longer periods of time that i don't i don't see that happening i mean there's all these complaints it trades 24 7. it doesn't have any circuit breakers there's no volatility bands where the cme would go i'm shutting that thing down right i mean there's a flash crash it really hurts when it goes down 20 and it doesn't stop you want it to stop but it doesn't stop it just goes on so that makes it very difficult for them i think uh to uh to access the space but still you have instruments efficient instruments that now allow you to at least put you know the put the toe in the part if you will you know there's etps here in europe by the way there's there's etps quite a few big ones um and and they're you know spot-backed uh you can trade them as a security you don't have to open a wallet so so all that stuff exists and i think that that is a good development maybe it's just a question of time another couple of month years and then everybody will have that in their portfolio one development i'd say that we see on on the exchange side is the amount of capital that now wants to buy liquidations every time they happen and i'm sure you guys see this too i mean it really is a pretty interesting bid that is that is there and perhaps that's what uh i don't know they get they they get reversed quicker and quicker i 100 agree it's so it it's a market that's set up for high volatility which makes it much less dangerous the most dangerous markets are the ones where you expect it to be stable you allow massive leverage and then uh and then and then it takes you by surprise so i'm thinking of exactly the u.s treasury flash crash uh five years ago i'm talking about you're a swiss you know we we went you know uh 2012 we were a um you know we were trading uh three percent vol 2 vol i think even and then suddenly we see a 30 move that was extremely dangerous that took out a lot of institutions and uh changed the whole face of uh fx margin trading in crypto we've got lots and lots of mechanisms to uh to manage liquidations margin calls it's it's expected so i i find it healthy to keep her these levels of volatility and every wash happens well it was what you were saying it's a true market you know the most dangerous thing as the smb learned is you you know you're suppressing natural interest and exactly that that won't last forever and and circuit breakers inevitably just create stress on the system yeah yeah nice to trade that gas futures which are commonly referred to as the widowmaker so i'm not too fussed with the volatility in bitcoin uh but you do you do raise a a good point there you know traditional asset managers are trying to maybe just diversify a little bit away from the 60 40 model bitcoin looks interesting but i think you know the big challenge for them is okay this is a new asset class a new asset class doesn't come across you know very often how do i fit this into my existing risk frameworks you know how can i fit this into my my portfolio uh does var looking at you know value at risk does that make sense in the you know when you hold bitcoin and things like that you can probably fit it into a risk framework uh you know you have a price series it's ticking it's 24 7. i think the risk framework is probably less the issue it's more like the accounting framework like what do you do with that from an ifrs perspective or u.s gap and and you know do you need to write that down write it off i mean how do you handle that how do you actually put a wallet address into a into a pension fund i mean how will they handle that if it's not a security it doesn't have an ice in i think this is where they they don't know what to do with that yet and then it's very easy to shy away from that and say you know what i'm let somebody else do that i'm not going to be one touching that one well i think you have solutions to market that for now there's a lot of third-party providers who've been working on tackling those you know sort of taxation accounting issues um that's also like an important development of the industry to highlight is that all the infrastructure that's been built around crypto on the more operational side of things so we talked about a little bit less but it's really matured quite a bit over the past years i think also again we mentioned this earlier but the incentive hasn't been there right there's been career risk and reasons why you won't do it now if we start printing you know a cpi number that's in excess of five percent or six percent and every pension fund's underwater then it becomes a different incentive to evaluate these asset classes so i think i think we're on the verge of the incentives being better aligned if you will and you probably can't get through a macro panel without discussing covid but i do think the last 18 months have been so disruptive for businesses asset managers and things like that that anything additional weird requiring more work has been delayed and you know just with the intention of people just keeping their normal businesses on the road so i think that may have been talk about risk for a second i mean if you trade you need to manage risk right it should be your first thing that you do is look at the risk and so what is the risk of your bitcoin investment not working or your crypto investment not working and i'm not saying that the thing can go maybe it does go to zero i don't think the probability anybody should be in that room saying that the probability of bitcoin going to zero is zero it may be minute infinitesimally small but it's probably not zero um something could happen that will just adversely affect the market um that may be regulation that may be banning that maybe this that or the other thing which we don't know um okay let's say the probability of that not happening is greater and you have a greater upside then you have a downside that creates that asymmetry what what i sometimes hear then is yes but but long term come 2040 2140 uh there will no longer be a block reward and the entire the entire network is going to be less stable less secure because there's going to be less hashing power because that reward is going to be gone so will the transaction fees be there in order to still keep that operable and this is what i liked about your argument i think people or institutional investors should hear this is if there is if there's financial rails or applications built on top of the bitcoin baselayer blockchain that can actually ensure that to happen if it's not all going to ethereum or other smart contract type of blockchains so be that lightning you know your transaction over strike and these type of things that can actually be a meaningful part of giving bitcoin a value if you ask yourself what is the value of bitcoin i mean yeah digital gold narrative this or the other thing but maybe it is so much more which we don't know yet because it can have second and third layer applications well not folk just i mean on that time horizon like probably as a binary uh it's certainly there is a binary element to the trade it either works or it doesn't i suppose well if we just talk about crypto broadly and not just bitcoin to me crypto is the easiest thing to be irresponsibly long over a medium to long-term horizon because every single piece of you know fud or contributor to volatility whether it's regulatory whether it's tether whether it's china banning like once those are cleared then the market's just open you know to continue innovation and marching along so i think the market gets very hung up on these shorter term you know potential negative events most of which i believe will just resolve themselves and the market continues to be you know so over a long horizon actually it's very easy to invest in in crypto confidently if you're trying to trade and do other things and be you know tactical short term you know that's a a different discussion but i think we'll look back in a few years and you know the concern about the highway test you know whether tethers back like all this stuff will be a funny story that we thought about and we saw way too many bloomberg articles about and the market will just kind of continue to to evolve because again i think it's because it's permissionless and peer-to-peer like people will opt into an incentive structure that makes sense to them and and the market is coming around to that that realization and i think every single time we get a headline even though regulation the u.

s like the market hasn't really been too phased by you know the various ways that we think regulation will evolve over the next month six months 12 months i think in part because the market doesn't really care anymore the market's like it's it's you know it has like anti-fragility regulation has anti-fragility to a lot of other you know potential attacks um and i think again the market's like collectively kind of coming to that realization but unfortunately it was amazing how little bitcoin really moved i mean it moved initially on on the news of china banning it for the thousands time right yeah but what like two days later that was yesterday's news in the market was higher right and then and then also you saw immediately you know dydx unit swap every you know decentralized d5 app started getting bit up people start you know sifting through well how decentralize is this is the team anonymous or do they have a regulatory attack vector like the market's getting pretty smart to you know what will continue to thrive even in a very draconian regulatory environment and so i think that's in part why it didn't respond you know too much and bitcoin itself has more regulatory clarity than most other assets within crypto so that's also helpful but and you guys um don't think it's very difficult talking about a question with a 20-year horizon it's uh when i typically trade for the next hour or the next two hours um so um well what i can say is that um a course trading strategy of mine is that um you know it's very easy to make money right the um what's uh what's uh what's more challenging is to make sure that you can survive through all of the downturns all of the squeezes all of the uh you know any any regulatory changes out there so our core strategy is just to make sure that we can uh we can keep trading regardless of the market conditions because you know there's a there's money to be made now could you make more yes sure but the big money comes when uh when there's uh dislocations and it's when you know other guys get taken out exactly with moves like this uh so being uh being agile and nimble to be able to take advantage of this is kind of the way to go and yeah sorry and to you to your point yeah i i mean that the growth in d5 has been incredible and i find that uh extremely encouraging as to you know where where crypto can go and and how robust it can be it's uh i think it's uh extremely positive for our business just to comment on your your question briefly i think yeah we can speculate about you know is layer two or other things on the bitcoin network um you know large enough to incentivize continued security for bitcoin post you know no longer having um um emissions from the network but i think that we could debate it all day but i think the bigger thing to recognize is how much money is being invested in infrastructure around bitcoin today and so the financial incentives that will exist 10 years from now 15 years now to figure out that problem whether that's actually a change to you know bitcoin the protocol through you know various bit proposals i just think that it has the ability to adapt and we don't you know answering that question now is not too relevant in my opinion um and i think so long as again there's a financial incentive by the market to address that security issue if in fact there is one because you know lightning or anything else built on top of it's insufficient again i think that the market will solve for that because you think the stakes will be too hyped then like 15 20 years down the road bitcoin being higher the industry will just take care of the thing yeah i mean we're talking about el salvador today you know brazil is talking about making illegal tinder tomorrow if in three years we have several other countries who now have adopted as legal tender you know and hold it on their their balance sheet then the stakes have become you know extremely high um and so again without if we just kind of keep a course of growth that we've seen over the last few years you know over the next you know five years or accelerate that further yeah i think there's huge incentive for the system to be problems to be addressed staying with that risk topic just for a minute longer i mean yes we've talked about these heterogeneous risks like you know there could be regulation that could be banning interventions all these type of things attacks right is tether a risk or would that just also be one of those things if it happened if something bad happened it would just blow by and two weeks later nobody cares um well people that use tether are less worried about tether than people that don't use tether um people that don't use which is weird yeah people that don't use tether aren't shorting tether i don't think really so i think it's quite hard to think there'll be a a run-on tether and then if you so if um it corrects me if i'm wrong in terms of what the question's implying i is the question how much of tether is backed because if you if you look at it i think they said what they own 30 of commercial paper and then if you said say 10 of that is in in commercial paper that might be uh evergrand or something you might not want dodgy yeah dodgy they are for to use to use a british word from the american um is uh you know so so then you then you've got a 97 backed stable coin um i don't think that's uh i personally don't think that's like a systemic event um because people don't hold tether as like a safe haven in the in the space i would look no i'm absolutely neutral on the plane yeah right but so nobody i mean certainly i don't really know what's going on people are trying to figure that out so i just brought that up because there was a bloomberg news story this morning and they're saying look we know about the commercial paper but really when you speak to people in the market that trade commercial paper in the united states they don't recognize the counterparty under the banks of their counterparty so are they really there and then that story went on to suggest that oh yeah the commercial paper actually sits in china and it has exposure to evergrand right so boom right so that that is that is good news that's good clickbait but but if something happens i mean i don't know does bitcoin go to infinity because tether is at zero or does bitcoin have or go down 80 because the entire system breaks i mean the the the reality is is that tether constitutes between 40 and 50 of exchange spot volume so it's clearly impactful for liquidity yeah short term people dumping tether to get into the next liquid thing could be beneficial to bitcoin um but i think it does impact liquidity you also have 11 billion in notional in smart contracts so that has implications for for d5 if all of a sudden you know people are concerned about the value of tether again speaking to you know funds in otc desks who trade in this heavily none of them seem to be particularly concerned you know they've all sent dollars got usdt they've all redeemed so and if you look at the trajectory of usdc or any other stable coin yeah more people money into the system as the asset class goes up because it's you know you have a fiat on ramps so again i'm not saying there's no risk there and i don't you know have the transparency to be able to say that but at least other market participants seem not to be as concerned as the bloomberg clickbait article would have you believe yeah and again it's another one of those things where if you finally get that out of the way like if test goes away that has to be also quite positive for crypto markets in general i mean everyone was worried about chinese liquidity or china's retail liquidity and we saw them completely banned and the market really hasn't you know budged after you know conceivably moving a big cohort of of you know traders and demand from the market so but but it certainly is keeping money out of the market i mean no no question it's keeping out of the market yeah no question because people are scared and they don't want to they don't even want to on ramp if tether is there well you know you're a new asset manager you published the day after this bloomberg article that you bought bitcoin and then bitcoin goes to xero because tether blew up and your you know investors are like well yesterday didn't you see this you know so i think i think that i think there definitely is uh i think you know from speaking to hedge funds like traditional hedge funds that invest in crypto they get a huge amount of nervous questions from their investors about tether it's the most common question i think i get people asking me a lot how to short tether who aren't in crypto they're just like they read articles like how do you short tether like well you can pay 11 a year and be short that's your carry cost and you know have at it and i see some concerns actually amongst even like pure crypto hedge funds who have got questions from their investors you know what's this tether you know what what are the risks etcetera yeah i mean you have as you know other stable coins have been introduced uh financial instruments on those as well so you can you can diversify away a little bit if needed and our investors asked us about our exposure to it as well so it's definitely definitely holding back capital from from the space so to will's point if we were to get more enforced clarity which you have to think is coming what i find fascinating interesting i mean spontaneous question i don't even know the answer to that but um if people say usdc and other stable coins have a better backing and say that's true better than tether more transparent why doesn't the market immediately move there like in a kind of like in the jump why is tether still growing people have just liquidity brings liquidity right it's uh you know it's still uh the most popular means of exchange within the uh cryptosphere so yeah i i mean these are questions that we've heard for years and years and years right and it's still there and it's still traded and uh you know we we we run on and off ramps ourselves um not not a concern i i i think we've seen enough uh disclosures now uh satisfied that it's uh solid as anything in the cryptosphere i think i mean i think usdc has a bit more you know the on ramps the kyc and aml required to mint usdc like for retail is certainly higher i think that's probably part of why you don't see that you also are able to blacklist addresses on usdc so that could also keep some you know entities away i mean i would almost reframe the question and say why don't why isn't dye you know five times as large when it's you know permissionless and collateralized by crypto and over collateralized and transparent good question um and i think i think again back to a point i made earlier it's like if regulators push on this then to me die is just the escape valve it's like okay well then we've already built a mechanism to create stablecoin and yeah like that has its own vulnerabilities potentially right it hasn't been tested and stress tested the same way other stablecoins have but it's gone through you know march of last year um successfully with some you know changes to the protocol you know continue to evolve but but i think you touched on something important there right it's uh each time you try and poke and regulate crypto in different areas it manages to you know pop out and squeeze in so all sorts of places the the the regulatory tools available at the moment um just aren't suited for uh for crypto it's uh you know regulators have got their um they're fighting their own uh vietnam war right they're they're they're going in there with the wrong tools uh to try and control an industry uh in that that's uh acting in a completely different way it's it's much more nimble it's much more agile they're not quite sure what they're trying to regulate and uh and even the objective is unclear and and right now we're seeing in the us uh even the uh even the home support for this regulation is uh is evaporating you know it's uh for me it's uh it's not even clear who's doing it in the us which regulatory body is gonna be there i can't agree on that exactly so yeah there's a little bit of carpet bombing uh attempts but uh you know this isn't um ultimately it's gonna fail and uh and i think it's very encouraging to see this sort of political shift that we've got at the moment this uh this view that uh oh okay uh china's cracking down perhaps crypto could be good for us as a source of uh economic growth um you know i i think that's very encouraging and and i think that's that's what's needed a rethink of okay what are we really trying to control here um maybe there's some different tools that we can use is good i'll spin that discussion around one final time before we're going to open it up yeah we'll have questions in two or three minutes if that's okay um one big topic for institutional adoption across the world mainstay topic is sustainability and what could the industry do to convey that better i mean i think then morehead from pantera has done a fantastic thing on the s and the g of s e s g saying that the s g is actually super positive with regards to bitcoin but when you equate the e4 environment with c4 climate a lot of people freak out um what is it that could be done better there i think you know including crypto and esg narrative is is fantastic you know if we if we take a step back and look at the growth of you know the esg assets under management uh it's been incredible uh when the first esg sort of hedge funds start to launch it was actually quite a hard challenging environment to raise assets and within a couple of years you know funds about 20 million we're at 1 billion so it's been some really great growth um coming to crypto uh i think it's all going to go through innovation you know you have minors now that are working with oil drillers uh to to recycle the natural gas that they can't move through um you know through the pipes and instead of flaring the natural gas though they'll recycle it and you know mine bitcoin um i saw this company in spain the other day who was uh using bioenergy from methane to uh to mine you know a negative footprint well nine bitcoin with a negative carbon footprint so um progress is being made in the right direction and i think somebody the other day on the panel raised a really interesting point is that if this progress is not going to you know take shape uh all the sg managers won't be able to invest in crypto so i think we're on an initial path but the right path i i think it's one of education as well i think you know the the renewable mix of bitcoin i believe is much higher than most any other um industry i think it's one of the few things that can co-locate next to sources of power or be used in all the innovative ways that he just outlined i think you also have to ask yourself the question you know is the are the other benefits of it outweighed by the energy usage i read somewhere that the u.s uses more electricity for christmas lights each year than for the bitcoin network i don't know if that's accurate but it's the right question say that right do we use energy for other things that may not be as you know beneficial to humanity as bitcoin potentially is and of course you know as we all know there's a number of other consensus mechanisms that are more energy efficient might have some other drawbacks um but again i think there's a huge area for innovation there a huge area of education i think right now at least institutional investors read that headline don't dig in and do the homework and again i think i agree with you i think it's a matter of perspective people get it the wrong way they immediately convey that to a waste of energy and then you know you reap headlines like it's consuming as much as the country of norway or things like that it's actually it's very difficult to prove that in the first place whether that's true or not you're wasting energy on a bunch of things christmas lights for instance um so i think it's a matter of education over time people will come around i mean if mining is done with renewable energies i think that must be the prerequisite that must happen you cannot burn coal to do it you can but you shouldn't yeah and then it should work well thank you we want to have some questions um we have three minutes left one very eager all right thank you very much for giving us a macro perspective actually i was thinking that blockchain uh uh we all know that was the best thing that happened in finance in these recent years uh and we know that non non med most of people are not crypto uh uh community at the moment uh what what do you think when a government or let's say eu or us decides to give another give another option not ban like china but give another option uh uh into the blockchain and let the banks build the layer two what do you think will happen let's say to the to the crypto community at that moment i mean it will be risked or it will be challenged or i mean uh uh government will will uh trigger this non crypto community by giving them an option from the government so what do you think the markets will will uh so there's just a good there's a good meme right now about i think like uh it's like an ico which is like usdc and like infinite no supply cap continue to print it like it doesn't matter if you digitize dollars i think that the core problem with you're trusting someone to make a decision and how much you can print and you can print it into impunity still exists so i think it's a helpful monetary policy tool like if you want to direct stimulus to a certain demographic because they're hard hit by covid or whatever it gives you a finer tool but i don't think it to me it doesn't change the value proposition for crypto in any way at all because it's still the same problems we have with monetary policy today will exist in the cbdc yeah just you know from a macro perspective i think the biggest driver is the the need and growing demand for a decentralized store of value and that's really the key thing and you know there is there's there will be great value in a digital you know digital real fiat currencies but but but you know it might actually be helpful for bitcoin because it just brings much more more capital uh into the digital space i i i think it i think it solves a completely different problem you know because it's this other country but cbdc's yeah i think it's super exciting you know and uh you know sort of china's uh say taking a different approach to saying okay this is ours and you're gonna go with this but that's great we're gonna see you know incredible adoption and uh and comfort created in uh in in the blockchain and around that it can only drive more innovation and more creativity i mean what's um um what i'd love to see is um not just a cbdc but a uh a government-backed blockchain that has computational capacity right yeah the the ease of cbdc's or the algo or the whatever it's um i i think that'll be truly exciting great unfortunately we are out of time it's been my pleasure moderating that panel thank you all very much by the way i think we're all around if you have questions see us for a coffee thanks very much enjoy the rest of the conference thank you