the crypto crash continues both Bitcoin and ether falling to
new 18 month lows. And the overall global crypto
market has dropped by nearly 27% in the past week
. And one crypto exchange is feeling the brunt but
is responding coin based revealing yesterday it is laying off
nearly 1/5 of its workforce. Joining me to discuss
is Anthony Georgiadis, co founder of the N.
F. T Blockchain, pastel network and general partner
for the technology asset fund, innovating capital. So
what triggered this crash? And is there any relief
in sight? Yeah, thanks for having me.
I mean, look, the first thing I think
to understand is over the long term, the crypto
markets not going anywhere. What's important to understand is
that what we're seeing right now is very different than
the 2017 2018 crypto crash, which is probably more
akin to the dot com bubble right now. We're
seeing a monetary policy driven contraction. You know,
I mean at the time back in 1718 you had
countless projects raising hundreds of millions of dollars with nothing
but a white paper or a sleek roadmap. The
markets seen a dramatic point of validation and adoption over
the last few years. It's already serving critical use
cases from enterprise applications like jpmorgan acquisition by sovereign states
like El Salvador, you know, flash forward where
we are now, the markets developed critical innovative technology
finding product market fit and we're working on infrastructure to
onboard a billion users moving forward. That being said
, you know, granted in the short term,
near minded investors really need to be careful in terms
of speculating on digital assets. You've had an inflow
of defi N. F. T. S and
very irrationally exuberant assets in the space itself in the
future. There's no doubt that this is going to
be a sustainable market class overall. The reality of
the situation today is that crypto has been highly correlated
with a debt based, non free risk asset market
market itself. When money is cheap, it's been
super easy to speculate and make bets on this sort
of technology future. You have low interest rates,
high flow environments, meaning that people can pay multiples
and really kind of fomo into a lot of these
general assets itself. So I just want to know
coin base is laying off 18% of its work force
, executives are saying there's a recession in a crypto
winter coming. So what do you think of their
decision to do this? Right? You know,
it's funny, it's as things have really taken off
and people were going into a hyper growth mode,
you have to react in the same way. Don't
fight the Fed, don't fight the Fed as you
take the stairs up. Don't fight the Fed as
we take the elevator down. And I think they're
taking an aggressive stance here and saying, look,
we went to a hyper growth mode, we probably
hired and put the car in front of the horse
here a little bit. We need to be thinking
through the next 12, 18 24 36 months where
going out into the capital markets is going to be
a lot more expensive raising external capital is going to
cost a lot more for us. And so how
can we basically better protect ourselves, our core technology
, our core product offering our core user base less
focused on continuing growth and more focused on maintaining what
we have here. And I think coin base is
a great example of what we saw in this last
cycle with F T X and crypto dot com,
you can really pay to acquire users. There's maybe
not any sort of intrinsic technological differentiation with one exchange
over the other. Um and so that is a
one interesting point in terms of a lot of the
froth that's been into the market overall. Um,
and a lot of the excitement around retail trading,
retail driven volume and whatnot that's really taken us to
this kind of point of capitulation. So it's interesting
that you said that though, because crypto exchange Finance
revealed today that it has opened 2000 positions for hiring
. So what makes the two so different? Yeah
, So been ince's a very distinct and interesting exchange
. I've definitely been um, interested in terms of
what they've done with a lot of the actual technological
development, they have the entire finance labs team,
they have an entire really incubation suite as well.
Um, so been, it's has really positioned themselves
on the forefront of basically being a quasi VC fund
in the space, especially in a lot of the
APAC region as well. So I do think with
finance granted, they're not necessarily in a lot of
instances under the tight regulatory um constraints that coin based
might be as well. So it's a little bit
easier for them in terms of an incremental cost to
acquire a user in a pack might be much more
negligible than it might be in in the States as
well. The other point to that is what is
the actual overall total adjustable market that they can continue
to penetrate? I do think that in the U
. S. And north America, it's highly possible
that we've reached an inflection point in terms of overall
retail penetration, we might not necessarily have that in
terms of the different demographics and geography that finances after
as well. Okay, so let me ask you
, let's talk about the users for a second because
there's concerns around not being able to withdraw money from
crypto exchanges during the crash. In fact, finance
paul's withdrawals for a few hours on monday the Celsius
network has halted withdrawals and has not said how long
it will last. And coin base say that users
could lose all their crypto holdings if the company ever
went bankrupt. So what are your thoughts on this
? We knew that we knew that. But for
those users who don't know that. What are your
thoughts, you have the same counter party risk on
operating on any centralized exchange as you might necessarily working
in a traditional brokerage house, especially as the industry
started to come off the ground in the seventies or
eighties, you dealt with the same counter party risks
. You still deal with those counter party risks today
, granted those counter party risks are a lot higher
in the crypto space, particularly given the reasons you
mentioned now, it's up to, I think a
lot of the more stringent and tighter regulations to come
into play here, make sure that any sort of
assets are adequately collateralized on exchanges. You don't run
into situations of potential insolvency. Uh, things aren't
necessarily being over collateralized or necessarily dispersed in ways that
we might have seen with Celsius over the last few
days here. Now, the been in situations a
little bit different. They halted trading on that exchange
in particular to more Blockchain and network related issues,
not necessarily anything related to potential solvency concerns on the
exchange itself here. So granted anybody that's coming into
the market itself needs to understand that counter party risks
are high granted high risk, high potential reward over
the past. There has been that overall risk premium
that's been baked into crypto assets, as obviously we're
moving into a market where you have liquidity drying up
over lover accounts that are basically getting liquidated locked in
right here. That is continuing to exasperate the problem
itself, that's gonna play into it. One of
the thing with these exchanges too is that I think
people haven't necessarily taken into consideration here is you have
a highly the high amount of respected funds and market
market makers that have caught themselves in kind of high
risk positions as if risk books over the last cycle
have been turning a shoulder for the last 18 months
, a month or so to let the music go
on. If you take certain market makers, those
who might drive a disproportionate amount of exchange volumes.
Typically they're meant to be market neutral. Many have
found themselves net long certain assets. So it's kind
of a double whammy. They're drying up liquidity on
the market and slowly getting back to a net neutral
position. So they're actually off boarding more supply onto
the market itself. That's providing for obviously increased execution
risks as well as reducing bid activity. And obviously
that's led to this kind of compounding effect in terms
of what we've seen in the sell off. All
right, listen, Anthony you broke it down for
us beautifully Anthony Georgiadis, general partner at Innovating capital
and co founder of pastel network. Thank you so
much Anthony for sharing your expertise on this