Wall St Goes Crypto: BlackRock and Coinbase

clients more easily manage and trade their bitcoin. It's a deal that comes at an interesting time for coin Base, which posted a record one point one billion dollar loss for the second quarter of two The company shares have fallen at least fifty this year, but of course they rallied right after that partnership was announced because people were

excited about the prospects for them. Coin bases shares have gained almost forty more than over three days, so you're really seeing some of the gains come back to coin basis stock that's down still more than six this year. Coin Based has also been facing a decent amount of

regulatory scrutiny on multiple fronts. For more on this latest Wall Street four into crypto, I'm joined by Bloomberg reporters you each yang this black Rock deal is really a validation to show that coin Base is still very much a giant in the industry and cell brush, So it was essentially an effort to kind of bring into the black Rocks sort of technology fold bitcoin alongside all these

other passets. You ashually welcome back to the podcast and still a first time guest, looking forward to have you on more. So, one of the things that was not necessarily expecting over the past couple of months was perhaps the rate of I wouldn't quite call it a detent, but at least the willingness of extremely traditional Wall Street firms large, very large and gigantic to engage with crypto

in different ways. And one of the most recent examples that we've had about this is, you know, something you've both covered in different ways, which is, you know, black Rock teaming up with coin Base to offer kind of a range of different sorts of services to institutional investors. And so before we go too much into what that partnership says, can you just explain to people what black Rock does, why, and why they're such a big deal.

So black Rock has eight and a half trillion dollars under management at the moment, that's trillion with a T. It's the world's largest money manager, and it does products pretty much ranging the gamut from you know, the most sort of index benchmark exchange traded funds, things tied to the SMP all the way through customized hedge funds and

private equity. They're also, you know, since they're founding, they've been heavily involved in technology that analyzes risk and financial markets, and they kind of use it for the backbone of both their business as well as for their clients. So clients kind of can use their technology to analyze risks

across their portfolios. So, uh, they're a massive firm. There are across markets, there are across geographies, and they're heavily involved in kind of the backbone technology of financial markets. And why are they now involved in crypto? So, I mean, I think black Rock has been watching crypto and digital asset markets much like many players in the financial industry, and you know, if you go back a few years ago, they were quite reluctant, like many sort of traditional financial players,

to actually jump into crypto markets. And they're they basically say that they're acting now in response to demand that

they see from their big institutional clients. So when their clients want to get into digital assets, namely and specifically bitcoin in their case, you know, they kind of feel like they have a business and kind of meeting their clients where they want to go and you achieve what's in as for coin base, so this is really a much needed validation for coin based, a company which has been through a lot especially he winds so far this year.

We know that coin base UM laid off eighteen percent of staff, their stock has been dropping along with the the collapse of crypto prices. They also had to navigate some regulatory uncertainty with their their products, and we know

that they've disclosed certain investigations by the SEC. So for a long time, I think the news that we've covered for coin base is really just negative for the company, and this black Rock do or is really a validation to show that coin based, as the biggest US crypto exchange, is still very much a giant in the industry, is able to sign on the biggest companies from other industries. Black Rock including UM and then Meta, the parent company of Facebook, is another example to to help them get

on board with the crypto economy. So from coin basis perspective, and you know, to your point about this is good news for them. I think their shares were up like fifteen percent on the day when this news was announced. So coin bases getting institutional credibility from having a partnership with, as Stila explained, the biggest asset manager or money manager in the world. And you know, solo like black Rock

is getting um kind of crypto credit. Right, You've got this very large, very established Wall Street giant now able to offer exposure and access to its institutional clients and way that feels less risky perhaps than some of the alternatives. But what specifically is this partnership about, Like, what does it enable them to do? There were two developments in

the last month or so. The first is a partnership with coin base that allows clients of both companies to use Black Rocks technology, which is called a Latin to essentially monitor their risk and their exposures to bitcoin alongside all the other kind of assets stocks and bonds, derivatives, other kinds of assets that they have in their portfolio.

So it was essentially an effort to kind of bring into the Black Rocks sort of technology fold bitcoin alongside all these other assets, and it was a partnership that then allows clients to kind of monitor their exposures at black Rock and then also use coin based to trade bitcoin.

The second announcement was a black Rock product, a private trust product that allows large institutional investors to invest in big and you achieve you know, one of the things you've been reporting on obviously is you know, coin based earnings over the past several quarters and months, and you noted in this the story that you and Solo worked on that institutional investors accounted for about three quotas of overall coin based trading volume in Q one two and

that training volume was you know, upwards of three billion dollars. So coin base clearly has an existing institutional user base. But this is also a way for them to allay some of the concerns elsewhere on wall streets about the fact that their retail business seems to be stagnating a

little bit. Right While even though institutional users make up the majority of the training volume on coin base, coin based do generates most of his revenue from retail users, and the company management noted during their earning scud that they're still expecting retail users to sit on the sideline during the following quarter, just because we're still pretty much in the downturn in the cryptal market, and usually during crypto winter, retails are are more um less encouraged or

or just not participating as much with treating and investing in crypto. So Quein bas is indeed a well recognized name among the institutional players, especially in the US. They're the first public company that gives them a lot of credibility.

But then at the same time, we also recently wrote a story about the decline market share of Quein based on a global level, and um the reason being that Quein base doesn't have derivative products offering to the retail investors, and then a lot of the cryptal treating volumes are in the derivative space, so that means that those volumes are mostly being down over at exchanges abroad. So this is kind of you're describing something that an analysts speak

would be a combination of headwinds and tail winds. They have, they have some stuff going for them and some things that are a little bit more challenging. I want to go back to what you mentioned though about you know, Goldman Sachs having previously done some work with with coin base, because it sounds to me like one of coin bases ambitions has really to become like the go to for Wall Street. Like, if Wall Street is going to do a crypto thing, you they should come to a crypto

thing with coin base. Is there are there any other crypto companies that are trying to challenge that ambition? Well, I always say f t x in the US will be another key player. F t x U s also has UM has been investing a lot in the US market. They started UM from overseas market, but they've since launched in the US. They actually also recently expanded into equities trading, which is their attempt to capture a broader based of users, including the ming Stock retail investors. So they're seeing as

another strong competitor UM in the US. Up next, you'll hear more from Bloomberg reports, uh Gang, and still a brush about the Wall Street partnership that's trying to bridge the gap between trad FI and defy black Rock partnering with coin based to make it easier for institutional investors to manage and trade bitcoin. But and so I want to go back to you know the second part of the black Rock deal, which is this private trust that

you mentioned. There's a quote in or a reference in in the story that you wrote about this that said, you know, Larry Fink, who's the CEO of black Rock, said up to four years ago he just hadn't heard of any interest from clients seeking exposure to crypto. That's obviously changed enough for for them to be offering this right now. You report on lots of different major institutional

investors asset manages. What are some of the to use a word we like to use here, like, what's the vibe shift that you're getting in terms of why these folks are increasingly comfortable with and why their clients are increasingly interested in this asset class Relative to Bitcoin, I think many larger traders feel like it is on relatively sure footing or more more stable footing than maybe some

of the other smaller tokens in the digital market. So where you see the greatest interest from maybe the the biggest, most established traditional financial players are in those areas, those products which are on that kind of sure finn and financial and regulatory footing. I don't think it's a shock that bitcoin is the one that you know, people are

most comfortable with. And there's those couple of factors I think that make the vibe feel different now, even in the depths of whether it's you call it crypto winter or just the meltdown that we've seen in the crypto

Marcus this year. Like I think, you know, so so many people's initial reaction this this year was like that's interesting, but like why now, like the market has plunged, And I think the answer to that is about this kind of shift in mindset that some large financial players have had in the sense that like the regulatory setting is sort of more comfortable and sure now for at least some products than it was three or four or five

years ago. They're more traditional institutional players in the market, so there's a kind of critical mass effect, and uh, that's sort of why the vibe does feel different, at

least relative to certain digital assets. U A. G. One of the you know, kind of storylines that you've been reporting out and you know, we've we've sort of written several stories about this is the kind of this revolving door of folks leaving traditional Wall Street firms and banks and asset managers going to crypto, starting their own thing. Crypto joining crypto companies sometimes going back to those more traditional places, or you know, starting a crypto thing and

those more traditional places. Is there anything that you've observed and you're reporting about the culture of these crypto companies that pose either opportunities or challenges in these more traditional partnerships. Hmm, that's a good question. I think even within the crypto industry, there's such a vast range of different types of companies, each with their different culture, so it's really hard to

just calcularize it in one way. But I think in general, we know that the traditional finance industry is heavily regulated and the executive stars are are very much used to playing by rules and um, getting clear errands um for everything that they do or everything they say, for example, and then when they joined the crypto company, UM, we know that the industry is still very much exploring a lot of services and how they how they promote themselves,

and then they're in talks with regulators to figure out the rules. So it is a work in progress, and we've heard of executives talking about how after they switched to crypto companies they not have to learn how to talk directly on Twitter for example, UM and to stand out along Twist West and as as their main form of communication, which is very different from what they used to do, which would have been getting approval from a

communication person, sending out a press release, et cetera. So I think there are cultural changes that they have to adapt to. But then at the same time, UM cryptal companies UM differ from each other. Working at coin based UM will give you a very different experience than working for some of the cryptal startup that quh G and thank you Sila. You can find more of h G and silas reporting on the Bloomberg terminal on Bloomberg dot

com or follow them on Twitter. UH is at U underscore young That's why U e q I underscore y A n G and Sila is at s A brush b R U s H on the next episode of Bloomberg Crypto. Why is there an image of a whale on the sleeves of the official uniform of the Chelsea Football Club? Why does a drone racing league need a crypto sponsor? And can crypto companies even afford to continue to spend billions of dollars of advertising in a market downturn?

Crypto companies have committed two point four billion or more on sports marketing just over the past eighteen months. We'll talk about all of this in the latest episode on crypto, advertising and Sports. 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

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