00:00You argue or ask the question rather, is this crypto's fimble winter? Do you think it is?
00:06Yeah. Yeah. So I got a little, you know, we have talked about crypto winters a few times in the
00:12past and I got carried away with the winter metaphor. And in Norse mythology, the fimble
00:17winter is the final disastrous winter before Ragnarok, the end of all things. You know,
00:23crypto, it's a really weird space, right? If you ask how is Bitcoin value compared to fundamentals?
00:30Well, what fundamentals? It's kind of all vibes. And it has bounced back several times from big
00:38declines because people had faith in it and because it was, you know, there was a lot of
00:43ideology behind it. But this time looks different. This time, a lot of the recent rise has been driven
00:50by Strategy Inc. and other, you know, crypto hoarders. A lot of it has been political associated
00:58with Donald Trump. Everyone is comparing the price now to what happened when he won the election.
01:04And those things are harder, you know, the kind of sentimental or almost mystical attachment that
01:11people have had to Bitcoin itself probably doesn't apply to shares in strategy, probably doesn't.
01:18And the kind of libertarian ideology that supported Bitcoin doesn't really apply now that it's largely
01:25a political creation. And it's sort of it's in some ways tied to what you think Trump's future
01:31prospects are. So this is different. You know, I think about this a lot, Professor Krugman,
01:36and I think about supply demand, certainly when it comes to trades in assets. I'm not quite sure what
01:41you call cryptocurrencies. I think we still struggle with what it really is. Having said that,
01:46if President Trump wasn't in the White House, what's your view on whether or not crypto would
01:51be, you know, here around $64,000? Would it be a very different trade potentially?
01:57Well, it might be. I don't think it would have gotten up to $125,000 or, you know, thereabouts
02:02without his election. It's possible that the day of reckoning might have waited longer. I mean,
02:09you know, there was a, in some ways, the very prominence of crypto, the huge attention given
02:16to it, all of the hype about this is a crypto friendly White House has in some ways, you know,
02:23led to a big run up, but also focused people's minds. I think there's a lot more. So what is this
02:28actually for anyway? And there's also, you know, the sell America trade, the debasement trade,
02:34which among other things, first of all, should have benefited Bitcoin if it was the kind of
02:40refuge asset that people had sold it as, but also the fact that a lot of people sold Bitcoin as being
02:47the next gold. And it turns out that in the face of doubts about stability, doubts about politics,
02:54the next gold turns out to be gold, not Bitcoin. I think it's a big wake up for people that, you know,
03:00maybe this isn't actually going to be an enduring asset. So I, you know, no, it's, again, it's really,
03:07really hard if you, you know, ask what, when people make for price forecasts for Bitcoin, I always
03:11wonder on what basis. Yeah. It's not like you can do a price earnings ratio on this thing because
03:15there's no, no earnings, no services. It's all just pure faith, but it does feel like we're seeing
03:22a real crisis of faith right now. What would stop this administration in your view from stopping,
03:27from, from coming in and bailing out the industry? I mean, the industry spent a lot in 2024 to get
03:33pro crypto politicians elected. It was successful in many different cases, particularly in the Senate
03:39race in Ohio and seating Sherrod Brown. Some Republicans want Scott Best sent the treasury
03:44secretary to buy Bitcoin to, by selling some of the U S's gold reserves. When asked whether the U S
03:49treasury has the ability to bail out Bitcoin, the treasury secretary said this week, he doesn't have
03:53the authority to buy Bitcoin with tax dollars. Could the president do that? Well, yeah. I mean,
03:59in general, you know, Scott Best, his word is not good as gold, let's say on, on these things. And
04:05they could, but I would say, look at the parallel. The U S spent a really fairly limited sum in providing,
04:14in bailing out Malay and Argentina relatively, you know, it's, it's a tiny sum compared with what it
04:20would take to bail out Bitcoin. And there was a firestorm of outrage over it, not enough to stop
04:25them from doing it, but enough to really give pause. If they tried to step in and bail out this
04:30industry, especially given all the stories about crypto as a channel of corruption, all the stories
04:36about the Trump family being enriched through crypto, all of the buying of politicians, the pardons
04:42of crypto, crypto criminals. I think the, the political backlash would be huge. Now, maybe
04:50they've spent, maybe the crypto industry has spent enough money to overrule all of that, but I think
04:57it's highly questionable. You know, one thing I think about, um, professor Krugman is transparency
05:02to investors. It's something we talk about with everything. It's one of the things we're going
05:05through with private credit, right? Um, it's why, although the U S market financial markets may not
05:11be perfect. It is why it's in many ways, the gold standard for global investors. Having said that
05:17on that transparency issue, does it make sense as we look at what's going on in crypto, that we really
05:23have a full understanding of the white house's exposure, the president and his family to cryptocurrencies
05:29to understand what's at stake for them personally, politically, financially, um, especially as policies
05:39unwind and to understand maybe how that might be from a supply demand metric, um, and all that that
05:47entails supporting this market, at least up until late. Yeah. I mean, we can, people are just making
05:53guesses at how much the Trump family is exposed. Um, and other government officials, by the way,
05:59let's not forget that the commerce secretary, Howard Lutnick, uh, you know, um, his, his firm was very
06:05close to tether, which is very much in the, in the crypto business and, and particularly seems to be
06:11used for a lot of the unsavory aspects of that business. Um, but it's certainly a significant
06:16exposure and there's a kind of shadow exposure in the sense that the crypto industry has been
06:23throwing a lot of money, not just at, at, you know, campaign contributions, but at the, the presidential
06:28family, uh, directly. Um, so, and, and a crypto, a real, another crypto winter would, would, uh, would
06:37be financially harmful to, to the, the first family. Um, but, uh, again, that's all sort of taken as a
06:45given that there's a stake there. I don't even know if it's a lack of transparency. We all know
06:50that there's a large personal financial stake in how crypto does. Um, the question is, can they
06:57really, really get away with it? I mean, there's lots of things have been gotten away with, but
07:01this is the kind of thing that really does get voters enraged. This is the kind of thing that
07:05leads to a lot of yelling at, at Republican members of Congress and town halls. So I'm not
07:10sure that this is something that they're going to be able to do because this is big, right? Crypto is
07:14still, even with the recent fall, it's still two and a half trillion dollar asset class. Um, it takes
07:19a lot of money to bail that out. We should point out on Howard Lutnick, his sons, Brandon and Kyle
07:24now serve as chief executive and executive vice chairman of, uh, respectively of Cantor Fitzgerald
07:29and that Howard Lutnick, uh, did, uh, divest to comply with ethics agreement he signed when
07:35he joined president Trump's cabinet. So we just wanted to kind of put that out there.
07:39Yeah, that's, that's right. I mean, it's, it's not personally, but you know, um, if, if, if
07:44my relatives were very involved in the business, people would be kind of, would not say that
07:49I had fully disconnected myself from it. Hey, professor, before we let you go, the promise
07:53of, of Bitcoin was this decentralized currency that would flow easily across borders, allow
07:58people to exchange value. Uh, and it would be, uh, you know, not tied to a single government
08:04entity. In your view, does Bitcoin have any value? No. Uh, or let, let me give a slight
08:12qualification. The places where Bitcoin has actually been useful to people, uh, I mean, it's,
08:17it's, it's, it's largely used for essentially, uh, uh, criminal enterprise of some kind, but
08:24not all crimes are the same. And I will say that if you're trying to smuggle money out
08:28of Iran or something like that, then Bitcoin is a way around capital controls. But it's
08:33also a way, you know, when, when, um, uh, it's also a way that, that criminals, uh, install
08:39malware on your computer and then demand a ransom, collect the money. Um, in terms of the original
08:44idea that this was actually a superior form of money, it's a total bust and it's a 17
08:49year old bust. That's the thing that gets to me. It's, this is not a, an idea of the
08:53future. This is not a cutting edge, uh, technology. This is something that is only slightly younger
08:59than the first iPhone. Right. And the, if, if it hasn't made any inroads as an actual legitimate
09:05means of payment in 17 years, then clearly it wasn't a great idea to start with.
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