This Week in Crypto: Musk, Doge, and Zimbabwe

Deputy Editor Beth Williams. This meme coin that Elon Musk loves has sword, and the feeling is that maybe he'll allow that to be used for payments on Twitter, so that would gain it some credibility and relevancy. And Senior editor Dave lid Uh, this is a market of expectations, and without expectations that it's gonna rise or you can drive the excitement about it, it has basically stalled. Beth, Dave, welcome back to the show. Hi glad to be here.

So this is one of those a lot of stuff happening in earnings weeks, and so Dave, I'm going to start with you, So let's let's talk about micro strategy. The last time we talked about them, they were going through a fairly significant, shall we say, leadership shuffle, and this is their first earnings since then. What were the top lines. Top line was that they had a loss on it. There was some speculation that they would have a profit. It was a small loss, but it was

still loss. And last quarter they could have they blamed it or well, the actual reason was for an impairment charge they had to take for their big quote holdings. They had a very small one this quarter, but the real issue was their revenue from the two biggest um businesses actually went down on it, So they have other issues to address. Maybe that's one of the reasons that Michael Sailor is now focusing on their quote bitcoin strategy now.

As a reminder, when you say micro strategies other businesses, they're not actually a bitcoin company now. They're an enterprise software company founded by Sailor and a few college buddies used to do things for like McDonald's and some interesting point of sales business. That's been a lot of residual revenue over the years. But as he stated, we either had to grow or change strategies, and he chose to diversify into into crypto. So micro Strategy is just one

of the companies that reported earnings this week. Folks have been really looking to see what happens with coin Based as a que obviously the only publicly traded crypto exchange in the US. But another big theme both of our coverage and I think just of like what people are paying attention to the markets generally, is about crypto minors. It doesn't look good for bitcoin miners right now, No, it doesn't. Argo came out the other day and said, hey, we may have to shut down after some funding had

tried to arrange through stock sale felt through. And that followed the announcement from Corse Scientific, who is one of the largest bitcoin miners, saying hey, we may go out of bankruptcy because we may run out of money pretty soon. So the crypto winner is started hit home. With all

these companies. You can see now whether it's the miners um whether them, or even the likes of coin Base, which we'll see a decline of revenue from both their institution and retail customers of estimates, which is pretty astanding when you think about it. It is. I mean, when you say, you know, Core Scientific, one of the largest bitcoin miners listed in the US, their shares have fallen nearly like a hundred percent this year, which is kind of mind boggling for sure, but it's also way more

than the actual decline in the price of bitcoin. You know, our colleague David Pan has written, shall we say, extensively about the challenges facing various bitcoin miners. They've gone through winters before. Is the expectation that there's going to be consolidation in the industry, Is it that some of them are going to kind of survive, possibly change business models.

It just strikes me as really unusual that somebody would actually invoke the B word bankruptcy in a filing when that's something that companies really tend to try to avoid at all costs. You're probably gonna see both on it. The biggest salivation they'll be winners losers. Companies will go away. They have a real symbiotic relationship with the market. You can't really have bitcoin without the minor and vice versa.

But for the investors who bought crypto minors as an equity diversification, now they're getting real lesson and how traditional finance works. In a bankruptcy, more times than not, the equity investors are wiped out. You're no longer tracking the

price of bitcoin. You're really at the mercy of the courts at some point, and that just dividing the assets among the creditors and their subordinate The equity holders are subordinate to the creditors, right that point, to um what you're seeing when when you see that this arc of companies going under, you're starting to see the rise of more distressed investors getting into bitcoin mining two or trying to pick up investments on the cheap, another sign of distress.

You know, Beth's interesting that you mentioned that we we had an office move recently, and you know, the moving goal itself fit to put the crypto team right next to the credits and distressed team, which was a sort of a like an accident, the quirk of desk availability. But it's been really helpful because we're working with those

folks so often. One thing that you know, we've we've started to see to your point, is not just the distress investors, but also the like the lawyers and the restructuring advisors, who are some of the folks whose names are very tradify, who have popped up in crypto in recent weeks. Names in in UH lawyers are Yeah, like we just published a couple of days ago that Paul

Hastings and Moelis are both emerging in this particular space. Yes, and uh, Paul Hastings has been involved with defending some being the lawyer for some of the executive Celsius as well as Core Scientific. Now an advisor go where where the where the movement is and right now the movement in crypto is distress. So you're seeing bankruptcy lawyers sort of learning trying to carve space there where they can, in some cases having to actually bone up on the industry.

And it's sort of charted territory between the voyage of digital bankruptcy, the Celsius bankruptcy, and now these potential bankruptcies with mining um sort of what do you do in the in the digital assets space when we're talking bankruptcy and also in the case, you know, separate from mining, where you're talking about issues where where some of the creditors are customers with crypto stuck you know, in limbo. Right right to Dave's point, it's sort of where in

the ranking are you? If everybody is coming after these these kinds of assets, there's a different kind of distress that's mostly affecting Media's with A, which is all about Elon Moss having bought with A after revolutionizing the space race and electric cars, the world's richest man is now promising a Twitter makeover, the multi billionaire bloviated firing off a tweet saying he's buying the platform to quoting now

help humanity. People having many an opinion about everything to do with will you pay eight dollars a month to be verified? To what does him becoming CEO mean for crypto? We are crypto podcast, so we're not going to talk about verification here, but Beth, you've been working with the various reports, including our colleague Hanna Miller, who's a regular on the show, about what Elon Musk might mean for crypto Twitter. What are some of those toplines? Well, crypto

Twitter is a big part of crypto. The crypto community is very attached to Twitter, telling their messages, pumping, dumping sometimes, but they also have a sort of a ethos about decentralization and perhaps crypto could be an avenue for a social media platform like Twitter, sort of democratizing the social media platform, letting people decide the kind of moderation, like from a base level, from the grassroots level, how they want the platform to be run. And Musk has sort

of danced around. He's been sort of coy about his willingness to sort of go there, and so I think there's a lot of expectation amongst some of the crypto world that he will try to go there. One way of seeing that is is this rally in doge coin when we say Raleigh and douge coin, where is doge trading? Is trading at less than fifteen cents, So let's just um, let's be clear temper that a little bit. Technically it's rallied.

But this meme coin that Elon Musk loves has sword, and the feeling is that maybe he'll allow that to be used for payments on Twitter, so that would gain it some credibility and relevancy. People are basing their doge enthusiasm on like an emoji, right, Like somebody asked you lot of question, like my guy, what are you doing about doge? And he was like eyes emoji and what does that even mean? He tweeted a picture of a shiba you know, with a Twitter t shirt on, so

you know, make of that what you will. But other more serious developments by Nance, which is a huge exchange. Crypto Exchange has invested five million in Elon Musk's Twitter and said that it's developed a team to sort of look at ways to use blockchain technology to help with the issue of bots, which has been this issue. These bots that flood accounts are you know, flood the network scams and etcetera. And maybe blockchain technology or n f

t s could be used to sort of mitigate that somewhat. Again, like Elon Musk isn't very interesting character, he's got a lot of money, He's got a lot of thoughts. Crypto you know it is hoping that some of those thoughts may help to to boost the industry. From from an idealistic standpoint, and then others who are more speculative think, you know, I'm gonna buy does now because it's going to become the you know, the currency of Twitter. So

we'll see. Indeed, we'll be right back with more of the week's top crypto stories with Bloomberg editors Beth Williams and Dave Lipta, Let's talk about something that's trading at a dollar, i e. The U. S. Dollar. One of the I suppose counterintuitive things about crypto as a market over the past several months has been how much it's

been a Fed story. And you know, there's no expectation. Well, I'm sure there's at least a few economists who somehow miraculously think the FED is going to cut rates um, but the broad reasonable expectation is that they're going to be in an you know, increasing interest rate environment for the foreseeable future. Dave, what does that mean for bitcoin, which had been sold as this inflation hedge and does not seem to be performing in any way that suggests

that's true. Well, it's it's been evident for a while now. It's it's kind of stuck in the water to crash in the spring early summer. It's trended around twenty thousand, and this is a market of expectations, and without expectations that it's gonna rise or you can drive the excitement about it, it has is basically stalled. And and and then the main reason is the FED has readjusted expectations for risk, so there's no longer free money in the system or zero p sent money on it, and now

there's a cost of speculation on it. So people are raining in that speculation in the absence of either the Fed ceasing to raise interest rates or cutting interest rates, and they're being some kind of gigantic hype cycle about anything other than douge. What are some of the analysts expectations that you've seen for like what's next for crypto? I mean, folks are looking into you know, you're seeing

more activity in some of the old coins. There's a lot of conversation right now around like what's next for defy. Various countries, the latest being Zimbabwe are starting to talk about well maybe we'll just get into our own digital currencies. What are some of those kinds of trends. The biggest trend you hear, really even from the maximalist in the bitcoin world, is that the institutions have are still hanging

in there on it. They've poured a lot of money into development, whether it's through VC money or some of the more better known major banks through development that type of thing, whether it's JP Morgan on its own coin, Jamie diamond saying bitcoin is trash, but we see the

technologists potential payment reel. So that's the incentive for a lot of folks to stay in and say, Okay, the institutions are coming back, but it seems we're back at the test mode period rather than an acceleration stage again on it, and it's wait and see. Is is very difficult when you're highly leveraged. Exactly. I was in a meeting recently with you know, folks who work in and around payments and processing, and one of the things that they were saying ing is exactly your point one. They're

taking an experimental approach. They're gonna they're gonna see what's working. But too they're starting to really separate things like you know, crypto as asset class investments, opportunity, speculative risk reward from possibilities for payments, whether stable coins or just like using the blockchain for you know, instantaneous settlements or whatever those

things are. And it does seem like, you know, the phrase of the week is like bitcoin is boring, But it does seem like right now people are starting to ask deeper questions around Okay, what else is there? Whether they find interesting answers to those questions, is I guess something. We'll have to talk about the on the show, so

we'll see. But just as a a kind of a closing thought, in your previous life, you were an editor on Opinion, and the opinion to you at Bloomberg has a lot of feelings about many things to do with crypto. What should folks be reading if they're interested in the opinion side's view of what's happening in this asset class Well, of course you can't mention Bloomberg Opinion without mentioning Matt Levine, who just published a covery cover issue of Business Week

on crypto. But also for some very interesting insights that go beyond just you know, just your basic you know, crypto criticisms, but go a little deeper. Leonel Laurent Parmey Olson, we have Aaron Brown who's an investor as well as opinion writer. All have really nice of deep thoughts about the industry, how it fits into the broader financial system, and and the questions to ask about it and potential solutions that it provides. Email us if you've already finished

the Matt Levin CRYPTOSU. I know there's a handful of you that have not been doing any other work, and I'm just reading that cover to cover. We'd love to get your feedback. Crypto Bloomberg dot net. You can find more of Beth and Dave's work on the Bloomberg Terminal, on Bloomberg dot com and on Twitter. Beth is b Willie Lou That's b w I L l I l I O U M. Dave is d Lita. That's d l I E d t k A. Beth also edits the Bloomberg Crypto newsletter that we publish on Tuesdays and Thursday,

so do subscribe to that as well. On the next episode of Bloomberg Crypto, it's no secret that an industry that popularized the phrase when lambo might have a thing for fast cause. But can crypto companies really afford to keep splashing out millions of dollars on Formula one sponsorships? Right now? This is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts,

or wherever you get your podcasts. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net or find us on Twitter. We're at Crypto. The supervising producer of Bloomberg Crypto is Vicky Verka Lena. Our senior producer is Janet Babin. Our producers are Mohammed Faruk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music by Leo Sidron. I'm Stacy, Marie Ishmael. Have a great weekend.