Strategies To Succeed In Digital Currency

covered in the business media. And what's also notable is that people actually went. It wasn't virtual, it was a real conference where real people got together talking all things crypto. I look at bitcoin today, it's pretty much unchanged here, just over thirty six thousand dollars per coin, but there's certainly been a lot of volatility in the crypto market. Let's get the latest with Jeff Dorman. He's the c i O of ARCA. Arc is a digital asset from Jeff.

Thanks so much for joining us here. I love to get your thoughts. Just let's start with bitcoin, because that's the cryptocurrency or the crypto asset class or asset that people are most familiar with talk us about the volatility of bitcoin. What does that tell you? Sure? Thanks for having me. I mean, like, the volatility is happening because this is a new asset class, and new asset classes

don't have the same structure, they don't have the same players. Uh, And it's largely driven by momentum and algorithmic quantitative traders to date um. You know, I think that will change over time as it becomes of a larger and more adopted asset. In fact, you're already seeing it's starting to decline a little bit because this is touching so many people. But you know, volatility happens when you have a lot more retail traders and momentum traders than you do fundamental investors.

And that's natural for an asset that doesn't really have any fundamental underpinning. Are we looking at a little bit of stability here around thirty six thousand dollars right now? Sure? Things as pretty quickly, Uh, you know, I think I think, Look, there's a couple of things that drive bitcoins value, right and it's obviously not traditional fundamental valuation technique. That's true

of other assets and digital assets, but not bitcoin. But what we know about bitcoin specifically is there's a couple of factors that have driven you have low rates and the declining dollar that's still very much in play. Nothing's changing there. Therefore, this should still be a pretty strong macro asset. You have institutional money entering the space. Nothing's changed there. We have, you know, tons of investors coming into our funds. Other funds are saying the same thing.

Money is pouring in everywhere you look into this asset class because of what I've said before, low rates and a low dollar, right where else are you going to go to invest your money? Um? You know, really the only thing has changed is recent narratives. You know, if you are going to watch bitcoin go up from ten thousand to sixty thousand every time Elon Musk tweets positively, well, then by definition when him and other corporations pull out,

that's going to have a negative effect as well. So I think the volatility is based on you know, a lack of UH conviction around UH the path that it takes to get higher. But ultimately bitcoins of binary bet it's either going to be worth a lot more if this is adopted as a true store of value and currency, or it's gonna be worth a lot less if it doesn't. And everything in between is there's a lot of fun

to trade, but not necessarily indicative of the end result. Jeff, you say money is pouring into this asset class, where's the money coming from? Is a retail Are you seeing institutional buy in? Where are you seeing it? Well, institutional buying, you know, in the traditional investing world, typically means your asset allocators, right, your pensions, your endowments, your sovereign wealth.

It's not really coming from there yet. I think there's a lot of complating the word institutional here in the market because all of a sudden hedge funds got involved, and all of a sudden corporate treasurers got involved. The reality is most of the buying power of bitcoin is still family offices, high net worth, you know, not necessarily in the hedge fund itself, but generally the owners of

a hedge fund in their own personal accounts. There is definitely real money coming in from the institutional world, but it's not the traditional institutional asset allocators yet. What what's going to change that? Um? Quite frankly, I'm not sure it ever does. Uh. You know, the institutional investors that we speak to the pensions and down with sovereign walls, etcetera.

They're more interested in the rest of the asset class. Uh. You know a lot of times I talk about digital assets the same way I talk about et s. Right, you would never say, hey, I'm an EPF investor. You say, well, what kind of ETF investor? Are you invested in healthcare stocks or you know, bond EPs, or are you invested in gold ets? Right? The e t F itself is just a structure, and what's in the structure is what's relevant from an investing standpoint, And the same thing is

happening with digital assets. We have different types of digital assets. Some are asset backed, some have revenue pass throughs, some are more like technology protocols and platforms, and others are cryptocurrency and money like bitcoins. I think the institutional investors largely gravitate towards the ones that have real fundamental analysis attached to them, which is the asset back tokens and

the companies with real revenue and cash flows. I get asset back tokens, I get um, but bitcoin is the only one where the token really has become a store of value. Um. You know that's not asset backed. The other interesting Uh, crypto plays like Athereum have a great platform, but I don't see any reason to buy the token. I think that was true historically, and I would have

agreed with you two years ago. But what's happening now is Ethereum is an ecosystem that other applications are building upon. Right in some way, thethereum is the app store, and all the other tokens are the apps that are built in the app store. Uh. You know how does the app store make money? It makes money on the transactions that are happening inside of that app store. And that's basically what ethereum is doing. To date. Uh, the token

has accrued none of that economic value. But with a new proposal that is going into place called e I Pine and it's shipped from proof of work to proof mistake, there actually are going to be real cash flows that eventually a crew back to the token holders. So it

is changing a little bit. And that's what's so interesting about this asset class is, Uh, these tokens can be representative of one thing on day one and ultimately morphin change throughout the evolution of of the investment um that the you know, the theorium itself is still kind of difficult for traditional investors to get their hands around because

it is this like broader GDP ecosystem thing. But the applications that are built on top of ethereum are generally real companies with real revenues and real cash flows, and the tokens can be modeled using a DCF analysis or a dividend field model, and that's what we focus on an ARCA, and that's what a lot of institutional investors are focused on as well. And that includes defy uh, some gaming assets and a lot of other ones that are that are coming down the pikes in the future

as well. All right, Jeff, just real quickly thirty seconds, what's the next mile post that you're looking for? As this market, this asset class continues to develop and evolved. Uh. For min milestone is is education um doing more things like what you're doing in others where investors can understand

that cryptocurrency is not the right term. Cryptocurrency is a very small subset of the market, but these other assets are really more like quasi equity, and ultimately, I think digital assets will end up in every company's capital structure from you know, Netflix, the Starbucks, see delta over time, and once you start to see the companies adopted and you see investors understand what these assets really are, you know,

being great coordination mechanisms and growth mechanisms for companies. I think the Narratabile change, and we'll be talking less about bitcoin and more about the cash flow producing entities that use a digital asset to represent that growth. Alright, very interesting stuff, Jeff, thanks very much for talking to us. Always a pleasure. Jeff Dorman is the chief investment officer ARCA talking to us about how was about to say cryptocurrency,

digital assets. I think digital digital assets. They're looking at one of them. Bitcoin just slipping under thirty six thousand, barely thirty five thousand, nine sixty four dollars and ninety three cents Ether trading for two thousand, seven hundred seventy eight. This is Bloomberg. Now we're bringing Scott Kimball Portia, manager of the Strategic Income Fund and co head of US fixed Income at BEMO Global Asset Management. Scott, let's talk first about what we saw happen on Friday. It was

pretty interesting with the jobs number. It was a miss, but still I guess a pretty good number. More than five thousand people got jobs in this economy as we as we reopened and we saw treasuries yields just dropped. I think it was five six basis points down to seven. We're trading there right now. M. Does that make sense to you, Yeah, good morning. I think it does for a few reasons. I think that's what the jobs report signals.

First and foremost is that we are transitioning out of the you know, the post reopening boom into a uh an economic environment where more and more of the US's economies own inertia is gonna have to take over, and that growth potential and growth output is going to have to be really driven by the underlying economic fundamentals uh post that that big boom in the recovery, which I think is what you saw in the outcome of the jobs report. Uh you know, the estimates versus the the

actual print. That's not a typical. That's pretty common as you get, you know, through these these handoff cycles where you may not be directly in line with the number,

but the directional trend still remains pretty favorable. Treasuries, however, probably took that as a little bit of a uh you know, if you've seen the U seal curb be very steep, probably taking off a little bit of the steepness to reflect the fact that, you know, things like inflation still have some upside risk, but the ability to really punch through into a an explosively higher inflationary environment is probably being a little bit tempered by this, uh

you know, this this transition in the economy, if you will. That's kind of where I wanted to go, Scott in terms of the discussion about inflationary concerns into this market. You know, obviously two camps, one being the Federal Reserve camp where you know, the signs of inflation that we are seeing or transitory, and the others, hey, it might be more systemic than that. Where do you fall so perfectly down the middle? Because I think the FED has

a lot of credibility on the inflationary front. They've they've been telling us for over a decade that inflationary pressures are transitory and they've been correct, and that's a long

enough streak to be more than random. So I think that the FED has the pulse of the inflationary pressures pretty well contained, are pretty well, pretty well contained and pretty well figured out, except this last couple of rounds there has been a little bit of a little bit of whack a mole and that everywhere inflation has moved higher, it's sort of popped up in different parts of the CPI measures. So for instance, the most recent read on

you know, used autos. You know, that's something that historically you look at used autos contribution to inflation, It tends to attempts to spike and and dissipate pretty regularly. Uh. And you can really explain why in our case, you know, with the pandemic we had, you know, auto plants were restricted or out put was was curtailed UM, and people were being a little more conscious of where they where they spent money, so replacement vehicles were driven more towards

the used market. So naturally we've seen some we saw some some booming prices there in in uh in used autos. But how sustainable is that going to be? That gets back to the Fed's point. Uh. I think our position has been that there is a directional case to be made for inflation to continue to creve higher UM. But it's bumping into some things that I think will constrain it. So for instance, oil prices most prominently, Uh, you know, we're coming up on seven dollars of barrel as we

model things out. If we break through that and you start getting a barrel, you know, that does certainly put upward price pressures, but the ability to pass through those pressures starts to roll over and you start to see that consumption will adjust downward. So there's indicator indicators like that at that point to mechanisms where yes, inflation can press higher, but the economic output starts to suffer, which then can sort of constrains it from running away. Is it?

Is it consensus though, that we start to taper at the end of this year, um beginning of next year, then start to raise rates and twenty two beginning of That's definitely the way the futures market has has has that's definitely out the I guess the path of the output the futures market has been favoring. UM. I think it's probably going to be difficult to really address the

right front. Um. You know, the FED has you know, between both tapering and transitioning interest rate policy in both cases, between the taper tantrum and whatever occurred when Pal tried to raise rates, whatever we want to label that UM.

In both cases, the market response, in the economic response was pretty clear that this version of the U S economy is going to be a little more difficult than pass cycles to have those meaningful breakthroughs uh in in in uh in monetary policy or so it's gonna be our our expectation that uh capering is probably going to take place. I think that there's definitely efficacy for that

in the economy. You're through the crisis period. As far as transitioning monetary policy to let's say a rising rate environment. UM wouldn't be surprised if that tail continues to push its way down the road a little bit. Hey, Scott, thanks so much for joining us. We really appreciate getting

your thoughts and perspective on the fixed income market. Scott Kimball, portfolio manager of the Strategic Income Fund and co head of US fixed Income for Bibo BIMO, a global asset of management, getting his thoughts on fixed income market again. The ten year Treasury remains down at one point five seven percent. All right, the Bloomberg Big Take story today, it's just fascinating people are finding those who took part in the January six Capital siege via social media and

are helping federal officers arrest them. We're seeing it all through about our social media feeds. David Yaffee Belny did some work on this. He's a legal reporter for Bloomberg News. David, it seems like, you know, everybody in the social media feeds are seeing you know, stories and of of of people that have been identified as taking part in the

Capital siege. How wide spread is that, um? So, you know, right after the siege on January six, there was kind of a wave of activism from people who just regular people watching the footage at home who were outraged at what had happened and wanted to do something about it, um, find some way to bring the perpetrators to justice. And so you had this kind of initial rush to identify people who were there that was initially focused on some of the kind of most most prominent people in the

in the photos and videos. Um, you know, the man with his feet up on Nancy closy desk, or the guy and the kind of animal head dress who's walking through the capitol, and and and that you know, there were you know, thousands of people all over social media sort of participating in that in that effort, and it's

sort of evolved in an interesting way since then. We're now kind of trying to track down, um, sort of less well known participants in the riot and pulled and sort of the background with some of those photos and and and try to really get a comprehensive sense thats who was involved. So you got one guy that the lead guy. I love his picture. He looks kind of like Indiana Jones. Um who's helping to find out who

these people are? Um. I guess he's a guy who doesn't have a job, so he has the ability to spend the time to spend forty hours a week on the internet looking for for these dudes. Yeah. The way, the way he put it to me is that he was living at home with his girlfriend and and she would log onto her computer to do her actual job, and he would log onto his computer and do his kind of sedition hunting gig for for a few months. You know. Uh, Like so many people, he found it

difficult to get consistent work during the pandemic. He's an actor in Canada, and those sorts of opportunities were drawing up. Um, and so yeah, it was really a combination of kind of curiosity and pandemic induced boredom that sort of motivated

him to get involved with this. And he just started spending you know, hours and hours a day pouring through photos and videos trying to kind of catalog images where you can see the same person multiple times, to sort of put together like a comprehensive account of all the

evidence of a particular individuals involvement. And eventually that allowed him to identify somebody, um who's who was charged by the FBI, UM and and his work was was cited in the arrest affidavit, UM, sort of underlying that that charge, David, don't we have a bunch of like n Essay blackbriar nerds who can do this stuff in their sleep? Um, you know, in in theory we do. And And look, the federal investigation has made a lot of progress over

the past few months. Nearly five people have been arrested. And that's not all because of the work of these sort of online tradition hunters, but there was there was just so much footage UM and so many people involved in such pressure to move quickly on this um that I think the government was appreciative of the of the

public's help. Um, you know, and I when I talked to the FBI about this, you know, they they said, you know, in dozens and dozens of cases, these sorts of tips have proved helpful, um, and they're asking for more help as they, you know, continue to try to round up you know, hundreds more people who were involved

in the riot and haven't been brought to justice so far. So, I know, David, the Senate Republicans recently blocked a bill in Congress to create an independent September eleven style commissioned

to investigate the riots. So does that mean we're you know, we're basically just relying on uh, the FBI and some of these amateurs to kind of bring people to justice as it were, UM to it to an extent, yes, I mean, you know, the the the investigations presumably going to succeed in putting some of these people in prison.

But there are broader questions about what happened on January six, you know, the extent to which far right groups were coordinating with each other, um, you know, public figures who may have been present or may have helped people behind the fiends and what they're role was there. There's these sort of broader historical questions that the investigation might not ultimately answer, in which you know, people had hoped some

sort of bipartisan report would explore. And so one of the things that's motivating these sedition hunters now is to try to kind of ship away at some of those, uh, those questions using the sort of open source resources that they have to hand, um and really kind of fill in where we're sort of Congress is sort of not taking action. It's ironic that both groups seem to use discord, right. I Mean, you've got the Q and On people on

there as well as the sedition hunters. Is there a risk that, you know, if the FBI keeps on begging if you see something, say something, you know, watch your neighbor and give us a call, do we risk some kind of East German Stazi surveillance state culture. I mean,

I think that's definitely a concern. I mean, some of these amateur fisition hunters are using facial recognition technology to try to to try to target people who are at the capital on January six, and the fact that that sort of technology is freely available to members of the public and that you know, anybody with you know, some sort of software engineering background can kind of put together relatively quickly a kind of facial recognition due to me

is definitely is definitely troubling. And these all sorts of civil liberties concerns or they could make a mistake, David, they could get someone innocent in hot water. Yeah. Absolutely, and we've i mean, we've seen that in the aftermath of January six, that people have been identified, you know, and named publicly who weren't actually actually there. Now, to their credit, a lot of the groups that are coordinating some of the sedition hunting activity are going to great

lengths to prevent that sort of thing from happening. They're urging their followers never to publicly identify somebody by name, and always to submit that information to the FBI, which can then go and verify those tips, you know, UM through its sort of more sophisticated means. And you know, you definitely see in some SBI RST after dated Oh you know, we've got ten tips about this case, and eight of them were wrong, but you know, you're the two that turned out to be correct, and that's how

we arrested this person. UM, so you know, I think I think that these groups are conscious of that risk and are trying to avoid making mistakes. But of course there's no way that you can control just thousands of people on the Internet. Really interesting story. I love the big take. Um it's such a cool uh new thing that we have on the Bloomberg And David, your your story is awesome. I love also the layout. It's really

well done. So thanks very much for joining us on this one, David, Daffy Bellini talking to us about the amateur Internet sleuths who are trying to take down, um, the capital rioters who you know, did things like serious bodily damage to a lot of the police. There's just trying to defend our nation's capital. This is Bloomberg, all right. Apparently I guess Jeff Bezos July is set to launch into space on one of those Blue Origin flights. Let's get the latest on this deal. Like, I think he's

not gonna be alone either. Ed Ludlow, he's an auto reporter for Bloomberg News, joins us from the Bloomberg nine sixties studio, and San Francis a rocket reporter. He's a rocket reporter now, is what he is uh ed. So Jeff Bezos going into space, This seems like a big deal for me. But I guess if you're one of, if not the richest person in the world, you can do those things. Yeah, it's a pretty small group of people that have the ability to do that, right. So

this is Blue Origins debut passenger. They call them astronauts, you know, private astronauts, but their passengers because it's a Philly autonomous craft. And he is going to go up with his brother Mark Bezos and one lucky I suppose auction winner. So right now, the highest bidder for the third seat has put two point eight million dollars down. That's it, you say, that's it. I mean, you know top took him and somebody paid sixty nine million dollars

for an n f T of a people picture. Yeah, I know, but the you know, the risks associated with being launched into orbit and budding n f T s. I don't think they're on par right, But you know, they're going to continue this auction until mid June when they'll close it. Highest bidder gets to go up with the Bezos bros. Um it's an eleven minute journey, you know, you go to the Carmen Line, which is about a hundred kilometers above above Earth. You know, it's kind of

the internationally recognized boundary of space from Earth. And then you come straight back down in the capsule. So when the capsule separates from the booster, the new Shepherd booster, it falls by itself with parachute, you know, very leisurely ride is the booster. I mean, are we talking about top check here? Is it going to land again on some autonomous ship in the ocean or is it ghetto? No,

it's automous. I think what's interesting about Blue Origin is that they you know, they clearly want to get some kind of milestone win if you if you go all the way back to two thousand and twelve, they were the first actually land a booster autonomously, ahead of SpaceX by about a month, one calendar month. But the thing is, Blue Origin has only done fifteen consecutive test flights of its technology by this point over a ten year period. SpaceX has done more than a hundred and twenty five

successful flights. So, you know, Bezos is I don't know if it's the right expression, putting his money where his mouth is, but he you know, This is a company that he has put one billion dollars into on an annual basis um. He has spoken very competitively about it about how his it's been his childhood dreams go to space, and you know he's going to go up him, going to put his mouth where his money is exactly the opposite, right, What is the risk here? I mean, what are some

of the experts saying here? It's it seems to me fairly risky, maybe more risk than you know you'd you'd want to take. Um, what if you had a hundred and eighty six point eight at a technical level, And again I'm a reporter, I'm not a space engineer. But the thing that the difference between the capsule that Blue Origin has is that there's no onboard control. Imagine meditation room with padding around the outside, six windows and six seats. That's it. If you compare that to the Dragon capsule

the SpaceX um produces. The astronauts in the SpaceX capsule have some limited ability to interact with the vessel, run checks, run controls, do some manual takeover in worst case scenarios. The Blue Origin capsule is truly autonomous. You sit there, you belt in and that's it. It's out of your control. I guess that's slightly disconcerting. And and the frequency of tests and vol lume of tests is much less, far fewer than SpaceX is done. But they have had fifteen

consecutive test flights. They've they've tested successfully. The abort features what happens in the event and of emergency. The way that it's designed is that not only does the capsule carrying the humans separate from the booster, but it gets basically a boost to change its trajectory away from the booster. There's a hard separation, which means that they you know, they wouldn't collide with each other, will come into contact and at that point the parachutes would open. But yeah,

of course it's fraught with risk, you know. And I think that less so from Bazos because we hear from him less. But Elon Musk, for example, is pretty transparent about what those risks are. Musk wants to go to Mars too, so he's maybe not far behind Jeff in Billionaires in space. Ed, thanks so much for joining us, Ed Ludlow there, he's Bloomberg's well rocket reporter, but also what covers cars for us out of California. Thanks for

listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple, pod Asks, or whatever podcast platform you prefer. I'm Matt Miller, I'm on Twitter at Matt Miller three. And I'm Fall Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio