Live from Bloomberg's world headquarters
in New York. I'm Sonali Basak.
And I'm Tim Novak. Welcome to Bloomberg Crypto.
Look at the people transactions and technology shaping the world of
decentralized finance. And in just a moment, Tim, we're going
to have a live exclusive interview in studio with Galaxy Digital's Mike
Novogratz. We're going to discuss everything from
Bitcoin to Etherium to lending. Plus, later, we'll be joined by
Coinbase's, head of Protocol san, the creator of Bass, Jesse Pollak.
As investors await potential ether ETFs. We discuss base and how the real future
may lie more with on chain technology and a multi-million dollar loan backed
by a violin that was once owned by Russian Empress Catherine the Great.
We're going to discuss how the loan is a sign on how Galaxy Digital is broadening
its lending business to wealthy clients. And now we are joined by Galaxy Digital
founder and CEO Mike Novogratz. And let's just start with the simple
things. Let's start with Bitcoin in the crypto
world, because we are flirting with that $70,000 level.
And you sit here, we have been around this space for a while now.
Is there more upside risk or downside risk as you see it now in the crypto
world? Listen, I think we're getting skewed to
the upside. I mean, just the fact that we're here
and a crypto show and Bloomberg so shows how long we've
come since 2015, 16, 17. But we kind of got to the finish line.
And when I say that DC has finally agreed in principle that crypto
legislation has to happen, that it should be bipartisan.
We still have a couple of holdouts, but it's the last few weeks have been
unbelievably positive in pushing the Democrats forward, saying this.
They don't want it to be a political issue.
And so that which was a headwind is becoming a tailwind.
It's not a full tailwind yet. We have governments that can't stop
spending money. And so that is so powerful for the
Bitcoin narrative. And then all of a sudden you hear, wait
a minute, the state of Wisconsin's pension fund bought 40 million of
Bitcoin. And so as we get more pension funds and
more institutions and, you know, there's not a lot of sellers.
So the question we know you hate and where do we end the year?
Listen, if we take out the 73,000 in the next week or so, we're going to end the
year at 100,000, somewhere around there or even higher.
Markets work. They they create ranges When the range
is the top of the range breaks, you know, you have a nice extension.
And so, you know, the bottom of that range was started around 40.
So 40 to 70, this 70 goes to 100. And so that's a good enough target.
Okay. We saw a spot Bitcoin ETF start to get
approved this year and we've seen a lot of inflows there.
So it makes me wonder what the next catalyst is for Bitcoin to actually
break 73 and get to your year end target of 100,000.
Yeah. So I had a had the same question asked
me, I don't know, five weeks ago and I said I don't think it will unless we get
one of two things happen, more regulatory regulatory clarity which I
thought was a low probability at that point and or the Fed starting to move.
We're getting the regulatory clarity. And even though it's not perfect, we got
enough that people now realize this is coming.
And why is that important? What does it mean?
So if SAB 121 this this arcane accounting bill and in time gets
overturned, it allows Bank of New York and State
Street and others to get into custody. If if the infrastructure bill, if the
fit 21 bill gets approved and allows Goldman Sachs and Citibank and all these
other people to start doing sales and trading.
And so as you bring those institutions in, huge money follows.
The Biden White House said it would veto that, overturning the Biden White House
vetoed the SAB 21, and then they said they they wouldn't veto.
And so they were talking. This was really sad what happened
because Donald Trump stole the show. He basically came out and said, I'm your
crypto president. The same day Biden had said he was going
to veto this thing. Why would a president sitting president
talk about vetoing a arcane accounting rule and so that turn the whole crypto
community into Trump's corner and almost was like a purity test.
People who said, if you don't vote for Trump, you're not a crypto person.
And finally, the Democrats heard. And so real quickly, nine Democratic
senators voted not to support that accounting rule against Elizabeth
Warren's wishes against the FCC. I'm going to steal Tim's question here.
He asks all our guests this I'm going to ask you at the end of the day, who would
be better for Bitcoin? Who would be better for crypto, Trump or
Biden? What is so clear to me is it's the wrong
question. What is good for our industry is a
bipartisan support of bills. Otherwise you're going to be student
body left, student body right. Listen, these elections are going to
swing back and forth for a while. And so crypto shouldn't be partisan.
The short answer is right now Trump won because he says, I'm crypto president,
I'm going to do all this stuff. But it's really that's a short.
It's a short term way of looking at things.
What we've done a really great job of and shout out to Brian Armstrong and
lots of people in the industry, our own Tyler you know we've got our own
lobbyist in D.C. is educating people on both sides and
there are tons of Democrats that are for good crypto legislation.
Now, so many people who are pouring money into elections right now and into
lobbying from the crypto community. What's the scale?
How much influence do they really have as someone, frankly, Mike, who's a
traditional way donor as well as a crypto donor?
The scale has gotten bigger. That's why the Democrats woke up.
There's been about 150 million on its way to $250 million in these crypto
super PACs. That's not all crypto money.
What happened was when the Democrats kept saying, we don't like crypto and
again, it was a very small group. It was Elizabeth Warren who said, I want
to have an anti crypto army. The way politics work in DC is every
senator doesn't know every issue. They look to the leader of that
committee. So Elizabeth really was running crypto
for the Democrats and she hates crypto. So all that money started to look like
Republican money, even though it was supposed to be bipartisan and focused on
really key races. Sherrod Brown's race, John Tester's
race. What would you say to someone watching
right now who might say, you know what, the FCC and lawmakers, it's their job to
protect people from getting involved in things that could hurt them.
And there are some people out there who say, well, there are a lot of people out
there who say, I don't want to touch crypto because I've seen how volatile it
can be. And I don't think it's something that
mom and pop folks should have in their portfolios.
I see you laughing, Mike. Well, because quite frankly, anyone who
bought Bitcoin, with the exception of one or two people that bought it over
70,000, has made money. You know, like if you bought Bitcoin and
held it like most bitcoiners do, you're in the money.
So they're protecting against making money.
That makes no sense. Listen, there have been frauds.
There have been lots of, you know, shenanigans in this crypto space and
those that need to be prosecute. And they were they were prosecuted.
They were pushed out of the system. Sam Bank was freeze in jail.
Other people will go to jail. And so I'm not saying this was a lily
white industry at any in any space, but this idea that we're going to protect
somebody from this new technology that cuts out the middleman, that allows
people to transact directly instead of paying a fee is just wrong, wrong
thought of, okay, we don't have a ton of time.
But I do want to get to one question on Etherium before we take a little break.
If we do see ETFs for Etherium approved in the coming months, which many people
think we will see, what will. What are your thoughts on sort of
excitement in terms of inflows, given that you can already get exposure to
crypto through ETFs and spot Bitcoin ETFs?
Will we see the same type of enthusiasm? Well, listen, we're going to see
enthusiasm. What was so unique about the Bitcoin
ETF? It was the first time in lots of ways
that the US federal government said crypto was okay, you're okay to do
crypto, even though Gary Gensler didn't want to say it.
He said it and the government said it. Larry Fink said it.
Larry Fink is the largest asset manager and runs the largest asset management
company in the world. And so the credential ization of Bitcoin
in crypto that was kind of limit up. This is a second step towards that.
So it's great for the Etherium community.
It won't have the exact same impact, but it'll have a big impact.
But all of these ecosystems are about bringing new people into the ecosystem,
into the circus tent, right? And so this is a new an easier way for
lots of people to participate in the Ethereum community.
And so it's nothing but a net positive. We're going to talk a lot more about
Ethereum in the next block. Galaxy Digital founder and CEO Mike
Novogratz sticking with us. And coming up next, we're going to have
also joining us, COIN base's Jesse Pollack to discuss base and the Ethereum
Network. And Galaxy Digital just turned a hundred
year old violin into an NFT. We're going to discuss and to access all
the latest data and news on crypto, check out c r y p go on the terminal.
This is Bloomberg. The promise of technology and the
promise of technology, especially in the context of like multigenerational
planning, in the context of retirement planning, in the context of like the
planning of your financial life is really interesting and really impactful
for people. And so we're really of the belief that
opportunity in character really is for everyone.
In the advent of the Etherium ETF, 21 shares President Ofelia Snyder on the
show last week and a new low cost layer two blockchain called Base is becoming a
major building block for popular apps in finance and social media.
Coinbase Head of Protocols Jesse Pollak created the base layer and joins us as
well as Mike Novogratz, who sticks with us for this conversation.
And Jesse, I think you can look at a lot of different ways here on how people are
using base, but I want to hear from you the data.
What does it show in terms of how big base is actually getting for Coinbase?
Yeah, so Coinbase has always been the most trusted and easiest way for people
to access crypto. And I think what we're seeing with base
is the same thing is happening. So in Q1 we saw eight times more
developers start to build on base and we're seeing really rapid growth of the
number of users who are also transacting on base.
And like you mentioned, they're doing all sorts of things from payments to
commerce to music to gaming. We're really seeing the next generation
of the Internet be built on chain on base.
Jesse, give us an idea of what you're seeing in terms of adoption.
I understand developers are building on base right now, but what numbers can you
share with us that that show that this stuff is actually being adopted by a
wider public? Yeah.
So as we reported in Q1 earnings, we're seeing millions of people start to
transact on base. You know, we really still think it's
early in the overall adoption and we're really looking at this similar to the
Internet era where over the next few years we're going to see people go from
pretty much doing nothing on chain to doing more and more of their daily on
their daily life, on chain every single day.
Jesse, let me ask you a question. So the $64,000 question really is what
changes in the regulatory framework need to be made before base can issue its own
token, its own, you know, L2 token that gets the trade where the users start to
be able to, you know, generate their own value and keep value by being a user,
right? So we have this whole crypto ecosystem
that's been outside of the regulatory framework.
You guys are well, you're often fighting with the FCC, but you're in your you're
operating as a listed company with regulatory guardrails.
What has to happen? Yeah.
So as we've said from the beginning, we have no plans to issue a token for base.
And I think what we're seeing in the broader regulatory environment in the
United States is that it's just too unclear for entrepreneurs.
And I talk with builders every single day.
And what we're seeing pretty consistently is that builders are having
to spend more money on lawyers and regulatory guidance than they are to
spend on engineering and that sort of overhead for startups in a country that
has historically been known for innovation is really, really bad.
And we think that if we don't get that regulatory clarity that we've been
pushing for, we're going to see innovation leave the United States and
go over shores. Right, Right.
But but, but I guess we had we had, you know, the fit 21 bill passed at least
the House. It's not in the Senate yet, but the
Senate is going to come with their view with something is as as as important as
that. Then allow you guys to say, hey, because
there's a tremendous amount of potential shareholder value
locked up in what you guys are doing. And so absolutely.
And we're really excited about the shareholder value that basis is starting
to generate. As you've seen, it's starting to
generate really significant revenue for the business.
I think in terms of the regulatory framework, we've seen progress with FIT
21, we've seen progress with state frameworks like the Do Not in Wyoming,
and we're really excited to see that mature and we're confident that as those
frameworks mature, we're going to see more innovation from Bass and from the
broader on chain economy. Hey, Jesse, what about the whole issue
around staking with the SEC? If there is a larger question around the
staking businesses, what does it mean for a theory and what does it mean for
the Ethereum network's potential to really grow in a significant way?
Yeah, So we've been obviously working with the FCC on this for a long time.
We do not believe that Ethereum is a security and I think that the regulatory
and the courts are starting to clarify that as well.
And so what we're seeing for a theory is that it's really the beginning of a
global on chain economy. It's creating a new next generation of
the Internet that's letting creators, that's letting builders do better than
they otherwise would have. And so what we're really pushing for is
more regulatory clarity in the United States so that innovation can keep
happening and we can keep building this future together.
Jesse, one thing that struck me also is that you have the exchange itself, but
when you look at based beyond the ability for people to build on it, how
does it make money At the end of the day, does it add any financial value to
Coinbase and does it charge anything of the people who are using it, or if so,
so the really powerful thing about base is.
That it's a new technology platform and kind of like the Internet transformed
the world in the early 2000. We expect bass and other chains to
transform the world in 2020 and bring about the new on chain era.
And the way that happens is by making it faster and cheaper and easier for
everyone to build new things. And when people build those new things,
we're going to see an incredible wave of new applications that users are going to
use and that they're going to pay for. And Bass is the application platform
kind of like us that enables that. So as more applications are built, base
is going to generate more revenue. And as more applications are built,
Coinbase is going to be the front door that lets users access those
applications. And that combination of both being the
platform and being the front door is incredibly valuable and it's something
that we think is going to generate a massive amount of value for our
customers and a massive amount of value for the business in the next few years.
Jesse, what would you say to somebody who's watching right now saying, wait a
second, if we're talking about this being built on Coinbase's ecosystem, I'm
kind of getting flashbacks to the nineties era of this walled garden of
AOL and the idea that Coinbase could be the owner of this platform, and that
would concern some folks. What would you say to critics out there
who say, You know what, I want this to be actually more open and I want to
build on something not associated with any company?
Yeah, well, I think this is one really important thing about base.
Coinbase is incubating base, but base is an open global on chain economy that's
going to increase innovation, creativity and freedom.
And the only way that happens is if base is decentralized.
That's why we built base as an Ethereum layer two, so we can inherit the
decentralization of Etherium. And that's why from the beginning we've
been incredibly dedicated and committed to making base as a technology platform
decentralized. And so what we're seeing is that
hundreds of thousands of users, tens of thousands of builders all around the
world are recognizing that decentralization and choosing to make
base their home because they believe that they want to be a part of the
biggest economy that's going to ever be built.
But Jesse, is isn't that kind of a half step until you guys can launch a token?
Because when you launch a token, it can be it can be decentralized.
But until then, it's it's not really decentralized.
There's a couple of different components of decentralization.
On the technical decentralization front, we're making really great progress.
Base started as what is called a stage zero roll up, which is a kind of an
early stage of decentralization. But we're in process and very close to
moving to being a stage one roll up. And what that means is we're going to
have a really strong level of decentralization that gives guarantees
around censorship resistance, give guarantees around having an open
platform for builders that let them actually build with confidence.
And so that's what we're most focused on.
We're focused on making the technology decentralized so everyone can build on
base and know that it's going to be there forever and they're going to have
the same access to it forever as well. Mike, you have a lot of questions about
the potential base token. Would you be higher?
Yeah, you know, it's interesting, right? I mean, hats off to these guys.
They've done a great job. The way this ecosystem works is the more
people that bill, they usually then get more of the tokens and the tokens go up
because they build them. And these are communities, right?
And, you know, I remember when I really first started trying to talk to people
about token ecosystems, I used to use a decentralized version of Uber called
Duba. And, you know, then I met Travis later
on and was explaining this to him and he was telling me what it took.
And I was like, That's why Uber got built by him and not by this
decentralized community. Maybe now it's time for decentralized
stuff. These are really hard things to do, to
jump started, to get people using it, and that's where value comes from.
Big thank you to Mike Novogratz and also, of course, to Coinbase.
Is Jesse Pollak Coming our way? Y Galaxy Digital Just tokenized.
A $9 million violin from the 18th century.
We dive into that right after this. This is Bloomberg. In a lot of ways, it looks a lot more
like a traditional investment bank. Mike Novogratz Galaxy Digital is
broadening its lending business to wealthy clients, and the latest deal is
a multimillion dollar loan backed by a violin once owned by Russian Empress
Catherine, the great Galaxy Tokenized violin, in the form of a nonfungible
token that was bought last year by Yat Siu of Animoca brands.
We're joined by Mike now to discuss why he did this and how you see the
tokenization of the violin you lent against both the hard asset as well as
the tokenized asset. My understanding is by tokenizing it,
you are able to kind of lend more here, whereas you need to over collateralize a
lot more on volatile crypto assets. So what is kind of the lending
opportunity that this is really giving you and why do you trust the tokens
more? Well, I mean, some of this, of course,
is symbolic, right? Like it's a $9 million Stradivarius.
Catherine the Great played it and we know tokenization is coming.
So we said let's do something that'll get some eyeballs Yat is one of the
great entrepreneurs. Every time I sit with them, I leave the
place and just feel a lot smarter. And he happened to grow up a classical
musician. And so he's got a great collection of
instruments and he wants money. So he comes to us for a loan.
We're like, okay, we'll take your Stradivarius.
This will sit in custody. What's interesting, you know, these
great violins become more valuable if you get the best violinist and the role
to play them right. The provenance of each violin from
Catherine the great to maybe it's Josh Bell or whoever he gets to play, it
makes it worth money. It's our collateral.
It have to come to us and ask it. We have a kind of a two factor
authentication. With this token, they can't move it
unless both. We say it's good and they say it's good
and then we can lend the violin out and whatnot.
What can you tell us about the terms of the loan?
Like why come to you for the loan and not go a more traditional route?
Because you can take out loans against assets like this?
Because in other places, because because it runs one of the biggest digital asset
companies in Hong Kong and most traditional banks are scared of
digital asset collateral. They does not even know this is physical
assets and collateral. Lots of his net worth is tied up in his
stake in Animoca and other digital assets.
We actually understand the value of digital assets and so we have a big
business lending dollar cash to clients who have those digital assets.
QUESTION And digital assets and traditional lending on what can go
wrong. So say tomorrow you have yacht saying,
hey, I want to fractionalized my token. And then the value of that token
fluctuates. How do you deal with that?
Well, I think, listen, the clear next step for lots of assets like this would
be to fractionalized them. And so that's the excitement of the
whole thing. Right.
I don't think we would have done this if this was the end game, but tokenization
is coming in instead of come in lots of different ways.
Republic Crypto, which is a company we have an investment in today, announced
they were tokenizing 10% of the PLT and selling that off to fans.
And so I think someone told me the story about bankruptcy once when I was young.
It happens really slowly then really quickly.
Tokenization is going to happen really slowly and that's the phase we're in.
And then really quickly, but mark my words, two, three, four years out,
you're going to see so many things tokenized really quickly here.
You have like 20 seconds. Is this one step closer to becoming that
elusive Goldman Sachs of crypto? You know, we go to work every day.
We have close to 500 employees and we're trying to figure out how to make a
difference in our industry. I don't like calling themselves the
Goldman Sachs of crypto anymore because the crypto industry is really
transforming what traditional fight finance is going to be.
Most of our investments these days are moving more towards chain, right?
And as the online world picks up, the off chain, work is going to slow down.
We we got to really that they're bumping up against the clock Galaxy Digital's
Mike Novogratz Mike you've got to come back but not too soon.
I don't want you taking my job. That is it for Bloomberg Crypto.
Join us again next week. This is Bloomberg.
