So, Malcolm, let me first get your take on the thesis that problems with
regional banks in the US have put some impetus behind Bitcoin or under Bitcoin
and driven the price higher. Do you buy that?
I don't think it's the banking crisis or the lack of confidence in the banking
sector necessarily. I really think a big driver is the
correlation of bitcoin with other asset prices.
Bitcoin's correlation with global equities is down to its lowest in some
time, hovering at around 12 percent. I think what we are seeing is across all
markets as investors, despite the macro environment and concerns about rate
hikes, are still fairly comfortable buying risk.
And I think we are going into a new crypto cycle.
We have a bitcoin having coming up. We're seeing a lot of exposure via the
derivatives side of the market. So I think it's not just the banking
crisis in particular in focus here, but it's really a broader appetite for risk
and investors perhaps getting comfortable reallocating, continuing to
be exposed to crypto. How much does the Fed's rate hike path
matter? Melton I mean, we're expecting another
increase in rates tomorrow, putting the top up at 525.
And obviously Bitcoin is an asset that doesn't yield anything.
With all of this competition, you can get more than 4 percent from two year
treasuries. Is that a problem for Bitcoin a
headwind? I don't think it's a problem for Bitcoin
specifically. I think where we're seeing more of a
slowdown is in the decentralized finance or defy landscape where people are
historically accustomed to seeing yields on lending out stable coins or on change
dollar equivalents. And what we've seen there is the yields
on stable coins in different defy applications are down quite a bit.
You're getting about two to three per cent, whereas in a treasury, a fairly
low risk or risk free asset is the old age, 4.5 percent.
It just makes it much more challenging. And we've seen that reflected in the
numbers on chain activity for bitcoin and a theorem in particular down around
15 percent in the month of April. Stable client activity and volumes down
closer to 40 percent on both the Bitcoin network and the theorem network.
That's predominant trade pair for most crypto derivatives.
So we are seeing a decline in on chain activity.
But I think, again, the investment thesis for a big client, particularly
for long term convicted investors such as micro strategy and others, is still
very much there. Well, as we're talking about the
investment thesis, so there's the question on regulation and how that may
hamper the investment case and on the regulatory point.
Bloomberg spoke earlier. Charlie Morris, the co-founder of the
V.C. Fund CMC Global, who said that the U.S.
crypto crackdown is opening up opportunities elsewhere, specifically
for Hong Kong. Listen to what he said.
The US is being quite negative from the regulatory perspective and it really
kind of seems to also the US is really shooting themselves in the foot with a
machine gun. And that gives kind of a golden
opportunity to other regions of the world.
Shooting themselves in the foot with a machine gun.
Melting. It's quite strong language.
But is that also kind of your sense of what really is going on here?
I think it's really important to differentiate who is actually in the
market and what market participants we're talking about when it comes to
derivatives, as we saw this week with both quite a base and Gemini, two very
US centric U.S. focused exchanges are launching offshore
derivatives focused platforms. Certainly the derivatives part of the
market has shifted overseas and continues to be overseas.
I think we do have a fairly healthy and robust crypto ecosystem here in the US.
There are many regulated on ramps, whether it's crypto native companies or
in tax and other more traditional financial players.
But I think the biggest challenges, whereas growth going to come from and by
and large the derivatives side of this ecosystem is still the largest and
drives the majority of interchange. And that certainly has shifted overseas
and continues to trade overseas. Speaking of where growth is going to
come from. What's next for coin share, specifically
Melton? Well, we will be reporting our Q1
earnings fairly soon, so be on the lookout for that.
And in those earnings, we'll share more on our strategy.
But given that we're publicly listed, I'm not going to say anything that we
wouldn't put in our in our financials and our quarterly update.
Can I ask you about stable coins meltdown?
Because this is an area where Caylee talks to regulators all day long on the
Hill. This is an area where people on both
sides of the aisle are confident that we could get some kind of regulation.
And we've seen Tether come back to a market cap of, you know, 80 billion
dollars almost a year after the collapse of Terra Luna.
Do you think stable coins are the way forward when it comes to a US foot in
the door? I think stable clients are certainly
seeing a lot of traction. And what's really been exciting over the
last three weeks is three major U.S. payments companies pay pal.
Visa and MasterCard have all announced initiatives to expand their utilization
of public block chain networks, not necessarily with the underlying native
crypto assets, but with these stable point assets.
And if you think about the challenges just in the U.S.
payments system the Fed is launching said now they're faster payments service
in July. It's going to be slow phased rollout,
though, low transaction limits. But we have all of these frictions,
particularly moving money, cross-border as well.
And this is an area where I think public block chain networks and this idea of a
currency for the Internet really shines. And so I think we're going to continue
to see integration of stable clients not only into the payments system, but also
very importantly with the shutdown of Silver Gate and signature, both of whom
had 24/7, 365 cash settlement networks. We're going to be seeing the utilization
of stable planes in interbank settlements as well.
Melton, how much does Fed now, which is supposed to launch this summer, disrupt
that? I honestly, I'm curious to see that as
well. I think I'm not as optimistic about that
now as I mentioned before, the limits on Fed.
Now, initially, I believe we'll be about one hundred thousand dollars per
transaction. If we look at crypto, crypto really is
this big hot ball of money. It moves in a high volume and a high
velocity, high speed all around the world.
And so the challenge is, how is something like that now going to
interact with the state? How all of money?
I just don't think initially it will have the size, scale, the capacity to
handle that. And then more importantly, the question
is, what are those key corridors where we're seeing trading happening if we see
the crypto derivatives market continue to move offshore and if U.S.
trading platforms like Gemini, Mace and others continue to focus their growth
and expansion efforts offshore, then I think the impact will be fairly minimal.