Fed Rate Hike and FPV Ventures

We'll talk to the heavy hitters behind the four fifty million dollar fund, including a top Morgan Stanley alone and Elon Musk getting even more political as he reveals who he's backing from president in this as he prepares to address Twitter and boys at an all hands meeting, divided on whether he'll save the company or destroy it. We'll get to all of that in a moment, but first this day, we'll go down in history. The FED raising interest rates by seventy five basis points, the most in

almost thirty years. Stocks jumped after a FED chair j Pal gave his view on the path four and in the fight against stubbornly high inflation are at ludlow. Here with more on the market moves and tech especially at Yeah, the FED really intensifying its efforts to cool prices. Let's look at the main takeaways from this historic day. Is seventy five basis points hike, taking the federal funds rate to one point five percent to one point seven five percent.

The FED forecasting of the interest rates could rise to three point four percent by December of this year three point eight percent by the end of next year. They the committee saying it's strongly committed to return the inflation to its two percent objective. Inflation of two percent seems a long way from where we are the inflation developments

of recent weeks. That hot print last week warranted the bigger height today wanting to power and there's no sign though in the economy of a broader slowdown in terms of how the markets reacted. Green on the screen, interesting because there's no one main takeaway. You look at the SMP five one and a half percent, and as that one hundred tech heavy index up two and a half percent, a pull back in yield, a drop in the dollar really interesting. Moving the dollar, the Bloomberg Dollar Index down

nine tenths of one percent, biggest drop since May. At one point down one percent is biggest drop since the November election. No one takeaway the market looking at Pal's words, listening thinking what the path ahead is, and you get to listen as well. Here's j P Now, do not expect moves of this size to be common from the perspective of today. Either a fifty basis point or a seventy five basis point increase seems most likely at our next meeting. Look, you don't want to put too much

stock in an intra day move. This is the nas That one hundred though, and after j power uttered those words around the size of potential increases at an extra ly meeting going forward, you see what that has That one hundred does the market giving relief rally, almost saying okay, we understand where we stand. Now. This is very interesting, but there's a lot going on. It's all in the data, and it's always in the data. The federals are going to keep an all on inflation and make decisions meeting

by meeting. All right, well, thanks for showing us that data, ed, Thank you. I want to get a look now at crypto bitcoin following at one point to just above twenty dollars, then pairing its losses, Blue Merctionale Bossi breaks it all down, and the bad news for crypto seems to keep coming shinale from all directions. Well, what's interesting, Emily is that even though you saw risk assets rise today in markets,

you did not see Bitcoin rise. You did see a parents gains in relation to some of the movies you saw by the said, but when we're talking about digital money here, we are still seeing a decline, although it's slowing. Remember, market watchers are watching for the levels that they saw at the peak of the last cycle. So if it drops the low not just twenty k, but we're looking at nineteen five hundred eleven. Is that worry area that you started dipping into a bitcoin and we're not quite

there yet. Let's flip up the board and got atherorium as well, and how it's doing. Interestingly, you saw that nearly one percent decline bitcoin over twenty four hours. Ethereum dropped less in that time frame. You only saw a drop about seven tenths of one percent, a little less than that. Actually interesting land Now, if you look at c r yp go, if you have a terminal, you see a lot of all coins rising. What else you

see rising was coin based. Today you saw coin based rise more than six percent, about six point six percent or so. Interestingly, that comes as we've reported about the shock that so many coin based employees have been feeling with the discipline they're taking, the job cuts that are happening now across the industry and a coin base. Coin Base employees describe this to Bloomberg as impersonal and surprising. So I want to pull up a tweet. Actually, what

a strange week it's been. You pull up a tweet here from Brian Armstrong just a couple of days ago. Remember this was responding to the idea on a y Combinator post saying that coin based employees had elected to out the executives here, and he had responded saying that if you have no confidence in executive company, why are you working there? Quit and find a company to work out that you believe in. And remember this post was on June tenth, just days before a lot of these

job cut plans were put in place. All right, indeed, pretty interesting, sweet storm, they're from Brian Armstrong, But also you think about the human faces behind these layoffs. Shanali, thank you. We'll get to you later for a deeper dive in our crypto report. I do want to get back to the market's response to the Fed's decision to raise rates by seventy five basis points. Victoria Green, chief

investment officer for G Squared, joins us. Now, So, Victoria, what do you make of the fact of the market rally today after this historic rate hike and all of the turmoil we've seen over the last couple of days. I think they were happy it wasn't a hundred basis points, and there's a relief that Powell's doing something. But I think we're all gonna wake up tomorrow and realize nothing changed.

The feeder stillhawkers. Rates are coming up, and the only way they tame inflation is by nipping unemploy him it. And so they're really to sacrifice the very low unemployment. They feel like they have wiggle room in the employement market and they've got its human inflation. And we look at this and say, the economy is still going to slow down. And I know we're talking about what kind of landing will have if it's crash and burn or a soft landing, and I think it's in a new

or impossible situation. There's a lot of factors he doesn't control. But I have to take heart with what the CEOs are saying and what J. Powell himself said, which is we can basically have unemployment come up. We have wiggle room and still historically low. We can see that come up because we have the tame inflation. So when you say it's out of our control, what what do you think the scenario we're gonna be looking at over the next six months to a year is gonna be? Is

this a recession? Is this a recession with a capital R or a small R? I think we like to call it bagel. Right, let's go go back to the old West Wing day since we're reliving the nineties right now. Um, but yeah, I think it's gonna be a recession. I don't think it's gonna be a two thousand and eight redo. But I think you're gonna have a lot of people looking around and seeing pressures unemployment. There's already seeing pressures

on the consumer, the consumers changing their buying pattern. The U S economy lives and breeze and and will die if the consumer slows down because you need the spending. And look at what tal Walmart and Target and all the retailers are saying there is already a change in consumption patterns. We're not seeing the electronics in the home goods move. They're focused on buying food and gas and

paying rent. And when that happens and we still see upward inflationary pressure, I mean, I don't think June's number is gonna look a whole lot better than than Maze because if you look at gas prices and rent prices,

you really haven't seen the roll over. So as we keep climbing this mountain and we have these pressures build and build and build, I think you know, kind of seeing you guys at the San Francisco people, you know, if you don't have an earthquake in a while, you kind of get a little worried when the next one

comes is gonna be the big one. And so we want to see some of these pressures come off the economy, but it's near impossible when you have the rent prices, housing prices, food prices, and gas prices where they are. What does this mean for big tech companies that have been riding high now for years, If they're not gonna die, they did need to read price a little bit lower. Um the problem is earnings growth looks a little susceptible, right, So that's the one question we have with the market

right now. I see this more as a very short relief rally and a further leg down because where is our earnings growth going to come from? You're willing to pay a thirty forty plus multiple if you have confidence that they're gonna grow their earnings and you have a future trajectory. And I think right now everybody's putting pause. You're even seeing layoffs come from these tech companies, and you know, Microsoft coming out warning about their earnings growth

and kind of doing walking that back a little bit. Um. You have to wonder how much should I really be paying for the stock right now? If they're not growing their earnings at the trajectory originally thought they were, how much should I pay for them? So I think big tech still gonna be under pressure, and the pressures are different. The pressure that Netflix is facing is increased competition, and

you're seeing that bifurcation across streaming. That's a little bit different than say the pressure that the Amazon's facing, which they're facing issues with that now they've got too much uh labor and they have too much storage space, and they're working on all these price pressures with fuel and delivery costs, so it's not uniform across the board. UM. And also what these tech companies deliver, how essential are they?

Uh and are they discretionary or are they something that people are willing to have to continue to use if the world slows down. Netflix is one that may still be at risk, even though it's priced more like a value stuff now, because if your pocketbooks hurting, you may start looking at cutting streaming and they're one of those right now that is facing the wrath of cord cutters. But these big tech companies aren't falling just a bit. They're not just under a little bit of pressure. I

mean they've already dropped significantly. We spoke to Cisco CEO Chuck Robbins yesterday UM, which reminded us that Cisco shares peaked in the dot com boom, then plunged and still still have not recovered. There. You're looking at a at a twenty plus year chart. Which of the big tech giants do you think could end up being the Ciscos of today? I mean, I hate, I hate to be a negative l A and root against me used against them.

But again I'll point to Netflix. I think Netflix is facing such a changed landscape from where it was five years ago, ten years ago, even two years ago. If you think about the number of streaming services that have popped up in the competition now that they face uh, and they may have more backlash as well. They're trying to cut down on the password sharing, and they're facing the wrath of people that that don't like that this is now less friendly company. Uh, We're seen as a

less friendly company to deal with. I think they could be at risk for for one that's lost. And then you can look at some of the pandemic darlings, you know, your zooms of the world, which did fantastic, But at the same point, you've got teams and everybody else has figured out how to tele conference a little bit better. So when I look at who's gonna be kind of a potential tech bubble dud, I think it's those that face competition and can't innovate. Interesting, how do you do

the crypto meltdown? You know, what is? What is? How does crypto survive this? Uh? Krypto needs to figure out what it is? You know, we were told it was the heads against central bank spending and inflation, and I'm pretty sure we can decide it's not that um. It's certainly got to get through this regulation hurdle. I think as it discovers what it really is because right now it's trading and correlated like a growth or a tech stock,

right uh. And because it's it's not really providing any diversification benefits or buffer, and it's definitely not providing an inflation offset. I think the blockchain and technology itself is very very important. I think this will turn out to be the start of a fintech revolution. I think you're still in the very very early innings of it, and people need to figure out how they're actually gonna use it, how they're gonna integrate it in their lives, and how

it's regulated in tax. And I think the regulated in tax question, we might see some of that come out this year. But that's actually gonna also make it where where you may see some bigger players come into the market because they feel a little bit more comfortable they're not gonna have a blow up. You know, you look at some of the recent crypto blow ups and it has put a little bit of a check on people that this is not a safe, secure investment. There is

a risk of a hunt to percent loss. And while the technology is a fantastic technology, and I think blockchain is a very innovative, we have to figure out how to use it. I'm you know, I'm not going around buying my Starbucks with bitcoint on my app. It's too volatile. You know, it's really not necessarily cash substitute. So what will it be? I think this year we're going to really figure out what is bitcoint as an investment. Is a digital gold We'll see. Victoria Green, chief investment officer

for g Squared love the metaphors. Thank you for joining us on this week's Bloomberg Studio. At one point on my exclusive conversation with Amazon CEO Andy Jassy about how the company is handling inflation, global supply chain shortages and customers that are getting squeezed by higher prices of everything from gas to groceries. We spoke at our Bloomberg Technology Summit. Take a listen for investors of financially, I'd say it's mixed. You.

I think we have some businesses are growing really strongly. If you look at aws, you know in grew thirty seven year every year. You know, it's not a seventy four billion dollar revenue run right business, which pretty unusual growth. And we grew with fifty percent year every year in our advertising business. You know, it's the thirty two billion

dollar revenue run right business. So some business has grown really strongly, and you know, we've continued to grow in our retail business despite pretty crazy comparables during But I think the real challenge for us there is on the cost side. And there have been several things that have happened um, some of which are more controllable than others, you know. I think the part that's less controllable is

really around inflation. And I think we thought that inflation would start to attenuate in two and with war in Ukraine, it just went the other way and has significantly accelerated. So the cost of trucking and line hall and ocean and air and fuel has just substantially gone up, and I think that will attenuate at some point. No one knows how long that will take. I think the more controllable areas for US are really around fulfillment center capacity

and productivity. It was taking about twenty four months to build new filment centers during the pandemic, and so we had to make decisions, you know, in mid two thousand twenty in early one, on how much demand we're going to plan for, and so you know, we we end up with more capacity and we need right now. And

there's a number of things that we're working on. We when we've stopped building on properties where we don't need it yet, and we've let a number of leases laps and not a small number, you know, of both those things. We've had a lot of occasions in our history where we've worked on productivity and made improvements, and we have a lot of clearly defined niches and I'm confident we'renna get back to the right level of profitability. You are going to sub lease thirty million square feet of space?

Is there a mistake in the execution there because of the OVERBA Again, because you have to make these decisions two years in advance, and again, if you put yourself back in twenty where we were growing thirty nine percent year over year on a two billion dollar revenue run rate, it's very hard to know what's the right amount to build and you have to make a decision. And we made the decision to air on the side of our

consumers and sellers. Ela Must just came out saying he has a super bad feeling about the economy, Tesla laying off ten percent of his staff. Jamie Diamond says he's preparing for an economic hurricane. The World Bank just slashed its forecast for global growth. How do you feel about the economic climate? Well, I wasn't planning on giving any guidance to please, but super bad or super super bad, I think, uh, there's some things that relates to Amazon

that are useful to remember, you know. I think the first pieces Remember the five of the of the worldwide retail market segment share is offline. And if you believe that that equation is going to flip at some point, which we do, I think it will. Who will flip over a long period of time. If you look at different town turns, um you know, should we have one at some point? We've been through a few obviously in

the twenty five years that I've been at Amazon. Customers change their habits, and so, you know, I also think there's those two reasons. Those two factors give me some optimism that even if we have a downturn, that we have the potential to still grow. We have a roadmap that's you know, probably three to five years long, and we're going to continue to invent. We're going to continue to be insurgent, and we have a lot of work to do to get to where we think we ultimately

can get for customers. You can catch my entire exclusive interview with Andy Jase Wednesday, nine d pm Eastern on Bloomberg Studio one point. Well, it is the end of the Internet Explore. Microsoft has officially retired it's once dominant browser, and while Internet Explorer has less than one percent of worldwide market share according to stat Counter, it is still causing some panic among businesses and governments. Japan in particular

might be the hardest it. A survey earlier this year found that of companies still use Internet Explorer coming up as the market scrapple with intensifying inflation, employees are facing the brunt of it as more and more companies look to layoffs to help save some cash. We'll have more

on that next well. As they watched the FED issue it's biggest rate increase for all in an effort to restrain rampant inflation, it might be too late for the tens of thousands of employees facing layoffs in a slowing economy. In the last month, we've watched companies across different sectors announced layoffs crypto, fintech, even real estate. Tuesday, both Compass and Redfinn announced they were cutting more than nine jobs combine for more not only these layoffs, but the broader

real estate market during this downturn. I'm joined by bloom Brigs Patrick Clark, who covers all of this for us. Was it surprising to see these kind of layoffs in the real estate tech business given just how um much the real estate market was booming. I don't really well. I think in January it might have been surprising. By you know, March or April, as maury trade started going

higher and sales started slowing, less surprising. And by the time these companies reported earnings I think in May, you know it, it almost felt inevitable that, um that they were going to need to downsize. I mean, Compass in Redfin somewhat different businesses, but um you know, one one

employees agents as independent contractors. That's Compass, and all their employees are either you know, developers making software for the agents or you know, various types of support staff readfin actually employees UM its own agents, and there's a different compensation structure and so forth. But um, the at a point when there are a lot fewer home sales and this um a lot less commission revenue coming into the brokerage, it feels inevitable that they're going to have to cut staff.

So we're seeing a number of companies, tech companies announcing layoffs. Robin Hood, coin Base, UM, you know read it just announced more layoffs today. But what are these real estate technology companies in particular them announcing layoffs. What does it have to say about the housing market. Yeah, there's just um, it's the housing market is slow and and and and we don't know exactly how long it's going to take.

Red Fan CEO Glenn Coleman said in the memo announcing the layoffs on Tuesday that sales were volume was sevent lower in May first company and that it would be year likely be years and not months um before you know, before the situation resolved itself. So you know, given um, given that it's it's it's these companies have a long road ahead. You know, they enjoyed during COVID. Uh probably

the best possible conditions for themselves. And that's not just red vanden Compass, but also Zelo or open Door, you know, any number of others. Many of these companies couldn't make money in the best housing market pretty much ever, so um, they're going to be in for you know, a pretty new scenario now interesting, And I wonder about commercial real estate as well. We just heard from Amazon CEO Andy Jazzy talking about letting leases run out, Amazon subleasing thirty

million square feet of its own space. Is this something We're going to see a lot of companies grapple with what to do with real estate that they picked up or perhaps not because in the pandemics some folks pulled back on real estate. So far, it seems like there's demand for the industrial real estate that you know that that at Amazon either owns or leases the you know. Um. Just recently there was a big merger announced in the

industrial warehouse in the industrial real estate space. UM company called Prologists, which is a big landlord to Amazon bought a company called Duke Realty, which is I think even more exposed to Amazon leases. So, you know, the if Amazon pulls back a little, I think there's the assumption in the commercial real estate world that there's still a bigger, broader shift to e commerce and there's other places to fill warehouse demand. All right, bloombergs Patrick Clark, who covers

the real estate market for US. Patrick, thank you for your insights. Welcome back to Bloomberg Technology. I Emily Chang in San Francisco. Fifty million dollars just defying the gloomy morale among private tech investors. How much was raised in venture capital for FPV the debut fund from Felice's Ventures and Morgan Stanley alums Wesley Chan and Pegg at Ibraheimni, which will emphasize early stage deals where they say they

have experience. They're both joining me now for more. But first I want to ask you both about the markets and the tumult that we are seeing today. Um Pega, you rose to the top of the ranks at Morgan Stanley and Cisco UM in earlier days. What do you make of what's happening right now? What kind of macro environment are we headed for? I mean, it's um no surprise we've you know, interest rates are like gravity, and when they're really low, we have a lot of high valuation.

When it rises, gravity goes up at things fall, and UM we're seeing that now. Look, the FED announced seventy five basis points somewhat expected UM in the last twenty four hours. And what it means is cost of capital is expensive and it just got more expensive faster. So it does mean to move away from alternative assets classes

like VC. So for for us, look, Wesley and I are so excited to have UM closed the fund during this environment to make sure we have dry powder for really mission driven founders who are going to continue to be born in these environments. And regardless of capital getting more expensive. UM. You know, it's not lost on us. Both Westie and I have gone through two downturns UM, and it's companies. In these downturns, some of the best

enduring companies have been born. You look at Google, you look at Airbnb, you look at Uber, you look at a Lassie, and these were all companies born and you know, more expensive capital environments, and those founders, those mission driven founders are going to continue to be coming around, and we're making sure we're going to have capital to support those in back the truck up when we find them. Wesley as someone who's gone through a couple of these.

How bad do you think this recession is gonna be? Is it gonna look more like two thousand eight or two thousand or something else? You probably look probably looked more like two And you know you're gonna see a lot of companies who can't raise capital sort of close shop. You're gonna see some layoffs because of that, which is unfortunate. But you know, people keep forgetting about the upside, which is that companies like Google, Nuber, and Airbnb got formed

in these crucible moments. You know, I started my career at Google uh in early two thousand one, and back then there was no other company really hiring. You know, Google came out of that moment where they were able to hire employees for relatively low costs. There were moments where we were buying our office furniture off of these auctions where we were getting discounts of up to eight percent off stuff. Um. You know, every engineer from top

schools wanted to come and work for Google. So in these moments of what seems like crisis, there's massive upside for the companies that are run by these mission driven founders that we back. You know, I firsthand witnessed it at at Google from the fourteen years I was there and got the c Google build what is one of the world's most world changing companies from those early days. It's interesting that you mentioned Google because peg I used to work at Cisco, where the stock still isn't back

to what it was in the dot com bust. So which companies in tech are going to be the Cisco's of today and which startups you know, in what areas do you think you're gonna see that kind of disruption to find you know, who's gonna be the Google? Yeah? Um, look, I think when we were early stage funds, so we're really focused on you know, mission driven founders who are building long have hundred year plans and long lasting businesses.

So those founders think about the cost of capital not being cheap, which means they care about, you know, unit economics. They care about being able to grow um even given more expensive capital. And you look at companies like a Cisco, I mean they've been because they weren't growing as fast. They've they've you know, they've been focused on growth margin and you're gonna have to have a shift when capital

is not as cheap. You know, it's not growth at all costs, and you have to shift more towards making sure you you can survive um these higher costs environments and you have well capitalized to do that. And there's amazing growth companies that are doing that. Now. You look at Canada, you look at Guild, you look at those They well capitalized, They're going to be able to endure this, and they have great, you know, hundred year missions ahead

of them. So I think it's really about time horizons and knowing that there's going to be some bumps in the you know, short term, and making sure you're set up for really passing this in a time and actually taking off during these times. You mentioned Canava and Guild, other companies you're in, flex Sport, plaid Um Wesley, What do you tell What advice are you giving to founders

in this downturn? My former colleague Eric Newcomer in his blog said that some founders are complaining that a lot of the advice they're getting from VC sound a lot more like marketing speak, you know, cut to the chase. Yeah, I saw that too. I agree. I completely agree with Eric. You know, the advice advice I give this simple take advantage of it. Never let a great disaster go to waste. This is this is a you know, Bill Campbell was a person I had the privilege of working with when

I was at Google. He was a trollneller, coach, chronical netbook and he would come up to Larry and study all the time. It's like, look, this economy is crashing, things are not going well. Don't let a good disaster go to waste. Take advantage of it. Sees the moment. And so that's the advice that we give to these founders. You know, they they've been behaved. We back mission driven founders.

They behave as if every dollars or last either the folks that fund the company on their credit card before a single investor believes in them early on, and they'll continue funding on the credit card if nobody believes in

them later on. And so when when when you're doing well, when you're when you're very careful capital, when you are sitting on a large horde of cash and you're profitable, it is a fantastic opportunity for you to seize the moment, hire all the top talent for half the prices they would uh in a in a in an economy where it's booming, and then go and like build product in businesses that people want and that do well in the recession.

And I mean, like having witnessed at First and at Google is nothing short of incredible the outcome of what happens when you see the moment. So this isn't about let's lay off a bunch of people, let's preserve cash. This is about leaning in. And you know we're partners to help fund these mission driven founders do it when the moment is right. That's why we have four h fifty million dollars help them out today. Are you guys

gonna be leaning into crypto or not? Pega. Eric also wrote that some vcs are quietly telling him they never believed in crypto anyway. Well, I mean this is a good one. Look I'll say it. Wesley was I think in November when he was on stage where um he um it was crypto was that as high and he actually called it? So, Look, we haven't been involved in UM. We're not investing in this fund out for those types

of businesses we um. We pick really resalient, long term businesses, and we have to understand the underlying value and so um leslie, you want to take it? You called it on stage. I think you called the key and you called the leslie. Okay, I pique Wesley. Where's the d Yes, yes, although there still to come. I mean, you know, at the end of the day, Bill Gates called it the greater fulls theory, right, you know, there's got to be.

It's a business models that's sometimes predicated and finding a greater full to pay up for your for your for your for your investment in crypto. And so when all the fulls are out, you know, there's somebody left to buy up your investment, it goes to zero. So we've avoided it. We've never done any crypto investments. It's something that we we people made fun of us for avoiding it and saying that we were, you know, when we were the guys not getting rich off of it. And

you know, today it's crashing like crazy. It's not lost on me that today's headline was that bitcoin almost dropped below twenty uh and was back, you know, and it's all time low, and you know, we're announcing a four fifty million dollar fund to investment resilient founders that don't do crypto businesses. So it's one of those things where you know, a lot of our LPs are sophisticated, blue

chip charities and foundations. They run children's hospitals. One of our LPs is a foundation that you know, provides underprivileged kids access to the performing arts. And last one want to do is take their money and put it in the business where you know, it's funded by greater fools. So you know, we we want to preserve their capital and find great businesses like Canava and Fox Sports that do things that add value to the world and add value to their customers. And you know, over the long

time Horizon, as Pega mentioned, they tend to do really well. Peg. I know you closed this fun just in the last few weeks. What was it like closing in a downturn? Did you have any moments of pan where you thought, oh, gosh, I don't know, you know, we're able to do this. I'd love to say, um, yes, in the last few weeks, but it was really early on we started this fund,

you know, in in February. We were fortunate and humbled by the reception we got, but there was a moment Wesley and I decided to launch it, and um, Russia decided to start the war against Ukraine and we're like, what's happening and is this the right time? And and we were really lucky raised this in a short amount of time, so really we closed it a few weeks ago, but um, most of the commitments happened very early on.

And UM, we're excited to have this dry powder to really be able to fund these mission driven founders because they're gonna need capital and we're gonna be here for them. All right, Well, we're excited to watch where and how you put your cash to work. SPV Ventures co founders and managing partners Pegga Abrahemi and Wesley Champ, thank you both.

And it's time now for our crypto report. With the bear market for bitcoin entering its deepest, darkest phase, according to some observers, was even long term holders who toughed it out until now coming under extreme pressure. Galaxy Digital chief like nov Grats, has two thirds of crypto hedge funds, could fail if the market keeps tumbling. Our crypto Contributionally

Bossa here to talk more about those concerns. Shanali take it away, Emily, Seriously, we had talked about tokens and projects facing pressure in the last couple of weeks, but now we're talking about the investors themselves. One company that people are very worried about is Three Arrows Capital, after a very vague tweet went out from a founder saying that they are in the process of communicating with relevant

parties and fully committed to working this out. What does that mean at the end of the day, and what is the future for a company like Three Arrows and are they the only ones? Remember Three Arrows was very exposed to Luna, which had apsed earlier this year. They had invested a prior to that collapse. But remember it's

not just the collapse of Luna. There's a broader decline and crypto assets that have been very severe, a lot of deleveraging, and the question is how far will that wash out go, especially if some of these funds start to liquidate many of the assets that they hold. A very cryptic tweet indeed, Tonaleo, Okay, stick with us. I want to talk about all this and more with our next guest. Coin Shares Chief strategy officer, Melton demiraz Meldon.

Great to have you with us, so I know you were listening into our segment earlier where our guest Wesley Chance and he called the top and that the bottom is even farther down from where we are. Now, what's your reaction to that? Look, hey, Emily has snolly great to see you both. Wish it was under better circumstances. Everyone's been calling bitcoin tops since the beginning of of bitcoin.

I've been in this industry professionally for seven years. One trend that's not going away as we continue to see higher highs as well as higher lows. Even at current prices around twenty thousand, we are still above previous all time highs. In the last cycle, we tend to see eighty nine draw douns. This is a volatile, highly cyclical asset,

but the secular trend is here to stay. At coin shares, we continue to invest in great technology businesses that are changing the world for the better, that are generating fantastic returns for investors. So look, I think it's a matter of time. Last year crypto commanded five percent of all venture dollars. This year we're looking at around the same, if not slightly higher. So I think crypto is here to stay. But you know what, the proof is in

the return, So we'll see what the future brings. You know, a lot of people are looking at that dollar number, but you know others are saying the right number to look at is nineteen eleven dollars, the high that bitcoin hit during the last bull cycle. Is that the right number to watch for? And if we get below that, which we're very very close to, how bad a sign is it. So look, I'm not tether to specific number, not to use the phrase tether which might raise some

alarm bells. Today I had to work in a little cryptopun um. I'm not so concerned about that previous all time high number. What we're looking for is we're looking at key liquidation levels. So we're seeing a lot of people just given the structure of debt in the crypto market, you have to overclateralize, and given these markets trade seven three sixty five, you can get liquidated in an instant. There is no grace period, there's no two week margin

call like Archegos had when when they were insolvent. And so what we're looking at is key liquidation levels. And then the other key numbers to look at is again that drawed down from peak to trough. So the last cycle we saw an eighty five percent draw down from peak to trough. This cycle, the high was around sixty nine thousand, so an eighty to nine draw down would put us between seven and fourteen thousand. So right now

we're at about a seventy percent draw down. We could go a bit lower, but we're seeing strong support around this twenty k number, and we're seeing liquidations slowed and for spots selling has slowed as well. You know, speaking of for selling this idea of three arrows and worries about other funds in the industry, the problem about funds facing trouble is more liquidation. So the question I have for you too is how systemic can this get? How can some issues be get more issues here to kind

of create some of those drawdowns that you're talking about. Yeah, and I think Sonale that's exactly the challenge here. Um. One of the great issues in in crypto is there tends to be an asset liability mismatch that happens whatever there is a drop in price, Um, there's more collateral that needs to be posted to keep some of the leverage in the system. And again, positions tend to be over clatteralized and can be called and even forced liquidated

at any point in time. So we kind of sees this vicious cycle where your liabilities decrease in duration, so you may have received as a long term liability becomes a short term one. You need cash. And then what we have on the flip side, if you're investing in venture and some of these long term locked up investments,

your assets are more long term assets. You don't have as much short term cash, or those short term salable assets you have have declined forty fifty in some cases or in the case of Luna a d percent in value, So you have this mismatch that gets exacerbated by the fact that there is no duration on debt in crypto yet. And so again this tends to lead to this recursive pattern where margin calls lead to people's spots selling, which

leads to falling prices more margin calls. So what we need to see is for this forced spots selling to stop before we find some stability here. This is a pretty pivotal moment. It's been a very steep draw down. As you had mentioned, what's the wake up call here? What are the things that people are flocking to that are that are longer term projects in nature that are maybe safer to make it through this crash. Look for us a coin shares, we manage billions of dollars in

assets we trade in markets. Risk management is the number one principle. The fundamentals of finance don't go away just because we're in a new asset class. So managing your liabilities, managing your assets, managing duration really important. Risk management is something we tend to forget about because you don't need it as much when number go up. But now that the numbers going down, I think we're seeing who hasn't

been managing risk. And so number one will always be for trading of of any type, markets of any type, just being really cognizant of the inherent risk you're taking in your business model with your positions, making sure you manage that risk. The added wrinkle of crypto is there is this really interesting structural change in the market because all these assets are on chain trading three sixty five with instant settlement. It adds a lot of pressure to

markets and times of volatility. And then the second component that's sort of a new ring goal is there's obviously technical risk in a lot of these defy our entream protocols where all of a sudden, instead of interacting with lawyers and bankers, you're interacting with smart contracts. New Frontier allow to figure out a lot of folks building solutions in the space that don't require token. At coin Shares,

we're continuing to invest. We're continuing to collaborate with great partners for building excellent solutions to manage risk, to manage margin, and to manage some of these new technical risks in new and innovative ways. So excited to continue doing that? Bowl or Bear Market? Are you continuing to hire because

we're obviously looking at these eight percent layoffs. At coin Base, Chong Pung Jao, the CEO of finance, had tongue in cheek tweet saying it wasn't easy saying no to Super Bowl ad stadium naming rights, large sponsored deals, but we did and today we're hiring for two thousand open positions. So a quen share. If we are not firing, we have slowed down our pace of hiring. Think one of the important things to keep in mind. I think coin Base actually from a risk management perspective and a balance

sheet management perspectives being very prudent. On average coin bases generating about one point six million dollars of revenue per employee prior to these cuts. With revenues going down, they obviously want to preserve profitability. That's in metric. We look at it at coin shares as well. I don't think we've seen anywhere close to the bottom of cuts. We're going to continue to see more cuts in the publicly

listed companies as well as the privately listed companies. And I think the other thing we will see is a lot of companies are relying on unspacs and pipes and all of these deals to try to go public and get some liquidity. I think we're going to see a lot of pressure on that going into Q three and Q four as well, which is going to change the hiring environment significantly. All right, Corn Shairs Chief strategy Officer Melton Demerez appreciated taking the time to join us. Shonale

as always thank you. Coming up. Will Elon Musk still need his Twitter center. His deal with Twitter actually goes through plus who. Musk says he's leaning towards supporting for presidential election. That's next. This is Bloomberg and it's that time for more news from the world of Elon Musk, the world's richest man, appealed the federal court ruling that upheld the SEC's requirement for him to have a Twitter sitter, which is ironic given he is about to buy Twitter.

At what happened. So in April US your judge said you have to have your Twitter sitter. This was a deal you made with the SEC, and just because you didn't like it when you made it in two thousand eighteen, you have to stick to it. You can't have remorse about it. And just because you are going to own Twitter, you still have to And so now legal team is appealing this and they're saying that agreeming itself breaches his freedom of speech, but also the SEC is harassing him.

So we'll see where it goes. It's more litigation from US. Interesting and he is also using Twitter to share where he's leaning right, So he said, it's a series of tweets about three am in the morning New York time, midnight San Francisco time. He did support Andrew Yang in presidential election. He's now leaning to Rhonda Santists, and he thinks Rhonda Santists who's the governor of Florida you see on your screen. Can win. That's kind of the inference

we're getting his words. He thinks he can win. That's where he's being his support. And de Santis is actually speaking today, had some thoughts about Musque's support. Yes, so matter of factly, they asked him what do you think of this? And Rhonda Santist, the governor of Florida, said that he welcomes the support quote support from African Americans.

Of course, Elon Musk is a white South African man, and in two thousand eighteen, when Rhonda Santis was elected governor of Florida, he did receive voting support from black Americans. So those were his words today. It is what it is, all right, This is just the way he's leaning. Though, what do you make of the fact that he in President Biden, who who should be natural allies just continue

to spark. Yes, Elon Must has been changing his politics over a number of weeks, right, he says the Democrats of the Party of division and hate and basically pulled the support. The friction at the White House and the administration Biden is Elon Must has called him out for not supporting Tesla specifically, you know he's called Joe Biden or accuse him of leading the Russian Revolution in EVS, but not talking about Tesla. All right, we will see

how that plays out on Twitter. I assume yes, thank you. And by the way, we're watching that all hands meeting. Elon must gonna be speaking to um all of the employees at Twitter Thursday morning. We'll have full coverage of that. And that does it for this edition of Bloomberg Technology. We're back here tomorrow with a number of great guests, including T Mobile CEO Mike Seaver, Coin Bases, Mark Lamb, and Jen hyman A Rent the Runway. I'm Emily Chang. This is Blowberg