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This is the Bloomberg Day baq At podcast. Good morning, It's Tuesday, the second of December. I'm Caroline Hepka in London and.
I'm Stephen Caroline Brussels. Coming up today. Crypto's deepening down turn wipes out almost a billion dollars in leveraged bets as retail investors get stung.
The EU warns the US against forcing a lopsided peace plan on Ukraine as Steve Whitkoff heads to Moscow.
Plus the verdict is in litigation. Finance hits a wall as bets on huge gains falter. We have a special report.
Let's start with a roundup of our top stories.
Almost one billion dollars of leverage crypto positions were liquidated during another sharp drop in prices yesterday. Bitcoin slid by as much as eight percent, bring its declines since early October to almost thirty percent, before recovering in early trading today. The volatile moves have hit retail traders particularly hard, as dip bars have failed to materialize. Jalik job and Putro, managing partner at Future Perfect Ventures, says the market is tracking a broader risk of mood.
The October sell off the crypto sector was due to the tariff uncertainty around China. We also saw people taking profits when when bitcoin went up to one hundred and twenty six thousand, So in the span of three months or less than three months, we've seen over a thirty percent drop. That being said, I don't see a downward spiral because there are going to be people who want to get access to the asset.
Joli Joba Putra speaking there as, traders are now watching eighty thousand dollars as the next key support level for bitcoin. Today, bitcoin is trading up six tens of one percent, just shy of eighty seven thousand dollars.
US Envoy Steve Whitkoff is traveling to Moscow today for talks over Russia's war in Ukraine. This as the EU's top diplomat has expressed concern that American attempts to push Ukraine into a lopsided peace plan would only encourage Russia's aggression. Europe is on edge after an initial twenty eight point plan proposed by the US suggested numerous Russia friendly concessions
from Kiev. Ukrainian President Vlodomizelinski said updated language in the latest draft deal looks better, but territory remains the most difficult topic. Speaking after a meeting of EU defense ministers in Brussels, Kayakala said putting pressure on the weaker side is not in anyone's interests.
Not in the interest of Ukraine, not in the interest of European Union, also not in the interests of the global overall security, because it's the United Nations chapter that says that you can't change for borders by force. If this pays off, we will see this elsewhere all around the world. Then we see that whoever has the power gets to take what they want, which is not good for the majority of the countries in the world.
The EU Representative for Foreign Affairs Kaya kalus There she went on to say that the outcome of today's US Russia talks will be quote pivotal.
European defense firms are scrambling for a vital component in high tech weapons rare earth minerals, but nimble US rivals are scooping them up more quickly. Some estimates suggest European suppliers could run dry in the coming months. Boombergs Freddie Filstone has more.
Sources told Bloomberg that US firms are much better at securing rare earths than their European counterparts. They have a sense of urgency and financial might, and they're more creative in how they navigate Beijing's restrictions on supplies. The EU is planning to commit at least three and a half billion dollars over the next year to help sever its dependence on China's raw materials. The funding would be critical
to securing the military equipment Europe so urgently needs. In London, freddie Fulston Bloomberg Radio.
Taiwan's foreign minister says the dispute between China and Japan could drag on for a year. That's after Japanese Prime Minister Sanai Takeichi commented on the possible involvement of her country's troops if China were to invade Taiwan. Beijing saw those comments as crossing a red line. Speaking to Blueberg, Taiwan's Linchi R. Lung said his country hopes the two sides can resolve their differences.
Japan has already showed it winness because it's in the parliament in a q A session, So let's have some big grounds for Beijing site. Maybe you take a I think maybe a year to stabilize the.
Situation, Taiwan's Foreign Minister Lindcha Lung speaking there. Meanwhile, Taiwanese President Li ching To has urged Beijing to act like a responsible major power. The Foreign Ministry in Beijing didn't immediately respond to a request for comment.
The UK is set to adopt a more pro business approach to China. In his annual foreign policy speech, the Prime Minister care Starmer said the country's dealings with China will have more consequences for the public than any other global shift. He added that increased collaboration would not come at the cost of safety.
Our response will not be driven by fear nor softened by illusion. It will be grounded in strength, clarity and sober realism, in line with our wider international approach, and guided by our conviction that strong, purposeful engagement on the world stage is the best way, the only way in these times to deliver growth and security for the British people.
Prime Minister Kare Starmer is seeking to draw a line under a turbulent period for UK China relations. His remarks come ahead of a decision about a controversial new Chinese embassy in London, and a potential visit to the country next year. According to Starmer, professional and financial services, as well as creative and pharmaceutical industries will be key beneficiaries of Chinese opportunities, adding the UK Investment Minister is currently visiting the country.
The Chairman of the Office for Budget Responsibility has resigned following the premature publication of analysis of the latest UK budget. Richard Hughes took responsibility for the error after an investigation found the report was leaked due to people entering a predictable Internet address. Former director of the Institute for Fiscal Studies Paul Johnson says Hughes will be missed.
It is a shame.
He was a public servant of real integrity and while you had the courage as well to stand up to both this government and the last one when they were less less than clear about their communication, shall.
We say, Paul Johnson, speaking there, the document's early release marked an unprecedented breach of procedure. Chancellor Rachel Reeves called the mistake deeply disappointing. In a resignation letter published on Monday. Hughes said that he was certain the OBI, the UK's fiscal watchdog, could regain trust quickly despite the failure.
And those are your top stories on the markets. The msciosh Pacific Index two times higher this morning, the nickey in Tokyo is flat. The Japanese yen two times weaker against the US dollar at one fifty five seventy one. After a keenly watched auction of government bonds there drew firm demand. European stock futures a tenth higher for eurostocks fifty Wall Street features down by a tenth of one percent this morning.
In a moment, we'll bring you more on how that route in crypto markets is stinging retail investors, plus why litigation finance is having a bad year. But another story has caught our writer today. I'm told it's the season of indulgence, Stephen, Oh, Is that why?
Yes?
Well, perhaps you'd like to indulge in some edible or couffable vices. Bloomberg's Kat O'Dell has this lovely list of the ultimate foody gifts. Maybe I will wrap up that espresso machine. The Breville apparently consistently delivering great coffee gear, and they have a new dual boiler espresso machine that comes recommended three thousand bucks. Though maybe next year Stephen for you.
Or perhaps you'd like a fancy toaster. I mean, you know that's the thing that you just think it's gone too far. Now we all need to calm down. So there's a new steam toaster from bell Muda, Japanese brand. It offers quote a salamander mode that works like a grill. That's nearly four hundred dollars and it's called Toaster Pro and I feel like for that they probably could have come up with a slightly more imaginative name. I quite like the bakery scent candle though, that's when I think
could appeal as well. And apparently there's a big deal this year about designer bottles for drinks as well. There's a fancy Don Perignon bottle by the Japanese artist Takashi Morikami, and also you know, elaborate tequila bottles. It's not just what's inside that counts. Apparently now the drink needs to look good as well.
I love it.
We're going to put a link to one of our fantastic Ultimate Foody gift guides in our show notes for you.
Well, let's turn back to our top story this morning, that plunge and crypto assets that we've been monitoring over the past number of days. The sell off appears to be taking a breather today, but traders are expecting more downward pressure. Our Markets Live Executive editor Mark Cudmore joins us now for more. Mark. We're used to seeing wild swings and crypto prices, but is this different this time, given the involvement of ETFs and these levered bets we've been talking about.
I don't think it really is different. You know, at its core, bitcoin is constructed to have a boom and bus cycle. You know, it's had repeated seventy percent plus corrections, and it's constructed to constantly have more. It can't, by construction, be stable at high prices. That's because you know, people have been convinced kind of in a kind of cult like manner to buy and hold rather than to persist. You know, tenuously that has any functional purpose. It doesn't
yield anything. So when it becomes stable at high prices, well then there's incentive for the whales and the people own a lot to kind of cash out of the margin. Remember, it needs always a marginal buyer to get up in value because it doesn't yield anything, doesn't produce any earnings.
So as soon as you get some stability, that just engenders the next round of utility volatility in the next collapse, and then it falls low enough the people want to speculate again, and it goes back into the next boom cycle. The only difference is this time is that because you've got more instruments attached to it, you know, it affects
more people. But it's like, you know, does it make a big difference if you you know, if people are losing money on one roulette machine in one casino or in five casinos, it's still that, you know, it's just a multiplication effect.
Okay, your view interesting and clear. Maybe that's yeah about the difficulties of bitcoin and what it is to invest in it. And I suppose I mean, as you say, the cautionary tales may be piling up right Michael Sailor's Strategy Inc. Which is one of those vehicles that help retail investors get into bitcoin. Does that look like a cautionary tail?
Now?
Yeah?
I think you know, at least one that you can say around Michael Sailor is that you know, he was original in this and kind of led the way, and I think I think strategy has a special status because of that. But the digital asset treasury companies don't make as much sense when it's you know, much easier for investors to get into the crypto exposure in many different ways like the ETFs you mentioned, so you know it's a digital asset treasury company is kind of sem pointless member.
You're accumulating an asset that yields nothing. You're basically just ccumulating a loads of lines in a spreadsheet, and so it doesn't really make much sense to have a premium for that. So at least Strategy was the originals, the kind of the first kind of led the way. It's got some status. It's the same way that bitcoin has a special status in the crypto community. But I think
you know that that is a worrying story now. I think it's very important they come out the statement yesterday they've got a reserve fund to pay their dividends to the next camera as a year and a half or something that fourteen months is not. But ultimately, you know, they're probably going to have to sell crypto down at some point. I think it's going to really worry people when their stock price falls below their holdings of bitcoin,
because that stops them able to raise more cash. And so I think ultimately it's a very flawed model, even if strategy was the original and best of them.
Mark talk us through this sort of bigger impact of the bigger picture of what we're watching in crypto as well. Is this a useful proxy for how investors are feeling?
I think it's an exceptionally good lead indicator of retail sentiment, which is obviously a very large part of the community. I don't think it's a good guide for institutional sentiment or professional sentiment, but I think it's the you know,
the highest beta and most reactive bit of retail. And I think one dynamic, and there's several dynamics to the recent decline, but one dynamic is that, you know, because this k shaped economy in the US well and also globally, we are seeing people get a little bit more squeezed and cost of living and unemployment, which is putting pressure
to exasperate things. Now, I don't want to put too much weight in that dynamic that's just feeding to the side, but I do think that's why when we see Crypto get hurt, we see the other favored retail names get hurt. They kind of the momentum stocks, the meme stocks, some of the biggest megacap techniques, even though they're solid companies. So the direct transmission is kind of very minimal, but the guide on retail sentiment is very important. So favored names and positions get hurt.
Yeah, it's going to be very interesting to see whether the enthusiasts hold on through another kind of bitcoin route to Bitcoin at the moment trading just below eighty seven thousand dollars, Mark, Thank you so much for being with us as ever our Markets Live Executive editor Mark Cudmore shedding a light onto the bitcoin sell off. Stay with us. More from Bloomberg Daybaqube coming up after.
This now, Litigation finances having a bad year after predicting huge growth as recently as January of last year. The industry which channel's money from investors to lawyers chasing corporate malfeasance, it's now finding that hedge funds and other sources of capital are pulling back. Are Managing editor for Sustainable Finance, Tanzanian Broger joins us now for more Tanzanin. Good morning. Let's start with a bit of background on this first.
How much has this industry been growing in recent years?
Yeah, good morning. So after the past half decade or so, the litigation finance industry has roughly doubled in size to about twenty billion dollars this year, so it's still niche, but it's definitely seen rapid growth. Now behind that growth, you've got a number of factors. One is simply that we've become more litigitus in general, with some sectors just developing faster than the regulations intended to rain them in, so resorting to the courts, resorting to lawsuits has just
become more normalized. In such cases are often just deeply complex and just increasingly difficult to predict in terms of how long they might run. So for law firms pursuing litigation, it's become just increasingly attractive as an option to have the suits that they're litigating backed by third party investors rather than having that risk sitting on their own balance sheets.
And those are pension funds or wealth funds or hedge funds who then take on those risks against the promise of a really sizable chunk of any winnings.
What do you think has changed in investors' attitudes and why?
To a large extent, what's changed is the regulatory and legal environment in which litigation finance exists. So in the story we list the main ones that's namely a UK Civil Justice Council recommendation from June of this year that litigation of funders need to be subject to requirements that touch on everything from capital adequacy to greater transparency on the sources of capital that are getting from outside investors.
And that then follows on from twenty to twenty three UK Supreme Court ruling that really made a difference to the potential for financial returns for the industry in that profits could no longer be calculated as a percentage of damages, but instead would need to be calculated as a multiple of costs, essentially which a sort of created an anchor that kept the base down. In the US, the industry is now worried that lawmakers are considering reviving legislation that
would introduce a significant tax on profits. And then, finally, in the EU, a landmark piece of regulation that lawyers had looked to as recently as twenty twenty four as an avenue toward more litigation. It's called the Corporate Sustainability Due Diligence Directive that's just been dramatically scaled back as part of Europe's efforts to simplify its entire regulatory framework and enhanced competitiveness.
So what's the consequence then, of this funding drying up?
Cases just generally have been dragging on a lot longer than many funders that expected, and then even when plaintiffs ostensibly win, actually getting the money paid out is in some cases proving very difficult. So for example, there's Burford Capital,
which is the world's largest litigation funder. They won a legal fight back in twenty twenty three relating to the fallout of the privatization of Argentine oil company YPF, resulting in a settlement of sixteen billion dollars, but since then they've just faced no end of delays and hurdles and actually getting that money paid out. So yeah, capital allocators are looking at examples like this and deciding in many cases that the risks are just too high.
And so what we're.
Seeing is that in some cases, rather than allegating funds that litigation funders can preside over with very few strings attached. They're being extremely specific and saying only this specific case is what they're going to back. And then also in some cases we've even seen litigation funders retreating from the business entirely and moving more into sort of advisory functions because the terms are simply to punishing.
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