In an interview on Tuesday (27 November 2018) on CNBC’s morning show “Squawk Box”, Barry Silbert, the Founder and CEO of incubator and venture capital firm Digital Currency Group (DCG) was asked to talk about the volatility in the cryptocurrency market.
Silbert started by talking about the correlation between the stock market and the crypto market:
“There is certainly overlap, so when people are bullish on tech stocks and making money on tech stocks, they’ve got more money to put into the cryptoasset class, and I think the opposite is happening right now indeed. Absolutely! Loo, today, you have a finite pool of capital that will invest in asymmetric risk-return type asset classes like crypto… those investors tend to also invest in higher risk type tech companies, both private and public. So, there is a finite pool of capital within that group of investors.”
Joe Kernen, a co-anchor of the Squawk Box then asked Silbert if it was true that institutional investors were buying crypto via OTC desks rather than through exchanges. Silbert said that that was true, but that retail investors need not worry about this lack of transparency:
“Look, the good news is that the exchanges and the prices on the exchanges is actually what is used for OTC trading. So, Genesis Trading, one of our companies, one of the largest OTC trading desks in the country, uses an average price across all of the exchanges when they are pricing deals on the OTC market… Also, our asset management business, Grayscale, has funds that institutions invest into which retail can invest into as well. So, it’s all related, it’s all correlated. There’s not two different markets: there’s not a dark market and a lit market. It’s all the same.”
Another person asked Silbert if institutional investors were buying crypto, why were crypto prices still going down. He replied:
“I think what we are seeing right now is the complete unwinding of the ICO market. So, I think what propelled the price to the highs last year was the ICO frenzy. The ICO market is dead — over! You now have the lack of demand from ICOs, and then you have all the sponsors of the ICOs who raised a bunch of bitcoin and primarily ether who are now starting to sell that. And then you also have all the crypto funds that raised money, and redemption request are coming in.”
He was also asked if he could see a floor (i.e. how low he thought that prices could go). Silbert answered:
“All you can do is look at the past bubbles and corrections… You’ve had Chris on this morning. He talked about we are five, six, seven times through this. You know, the first couple of times you see your balance sheet drop by 80–90 percent, it’s kind of rough on the stomach. By the third or fourth time, you get used to it. Now, we view this as a fantastic opportunity.”
When asked about the cost of mining as some kind of benchmark to value Bitcoin, he said that he wasn’t a fan of using this model:
“What’s happening behind the scenes [is[ companies are being built to create infrastructure to enable the onboarding of a whole new category of investors, which I think is going to happen in 2019, and that’s the institutional investors. So, behind the scenes, nobody has slowed down.”
Featured Image Courtesy of Digital Currency Group
