Sam Bankman-Fried and Matt Levine on How the Crypto Market Really Works

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:15)

And I'm Joe Weisenthal.

Tracy Alloway (0:17)

So Joe, it's been, I mean, I think it's been kind of a tough couple weeks for crypto. We had the price of Bitcoin go down below 30,000 at one point, but it's shot up since then. I think it's closer to 40,000. But on the other hand, we had some interesting developments around the sort of crypto ecosystem, around the market structure aspect of crypto.

Joe Weisenthal (0:43)

Well, it's interesting because, all right, we did get this sort of bear market, and I don't know if it's still in one, because as you mentioned, it's bounced back.

But unlike, say, the sell-off in 2018 or at the end of 2017, it doesn't feel like there's any slowdown at all in the pace of investment into this space. Whereas at the end of 2018, it's like, all right, well, maybe this whole thing was a bubble or a fad. This time, it feels like no one's thinking that it's full steam ahead on various business plans and so forth, at least in these early months since the peak back in April or May.

Tracy Alloway (1:21)

Yes, indeed. And as a sign of that investment interest, we just had the crypto exchange FTX, which we've talked about on the show before.

It completed, I think it was a Series B fundraising of 900 million that valued the company at 18 billion. So to your point, I mean, the crypto ecosystem itself is clearly being valued by investors as a future investment. 18 billion is pretty big.

Joe Weisenthal (1:50)

Right. And of course, FTX is the exchange we talked to the founder. It was not that long ago. I think it was either maybe like March or April.

And it feels like his star, his significance within crypto has only probably like gone up like 10x since like literally like the last three or four months.

Tracy Alloway (2:11)

Yeah, I think that's fair. So we're going to be talking to the FTX founder, Sam Bankman-Fried, again on this episode. But we wanted to do it a little bit differently this time. So we've also brought on Bloomberg columnist, Matt Levine, one of the best, probably the best financial writer out there, if we're being honest.

And he's going to join the conversation. And we're just going to talk about what FTX has been doing and where it might go from here.

Joe Weisenthal (2:38)

Can't wait. Let's do it.

Tracy Alloway (2:39)

All right. Sam and Matt, thank you so much for coming on the show.

Sam Bankman-Fried (2:44)

Yeah, thanks for having us.

Tracy Alloway (2:48)

So, Sam, $900 million is a lot of money. What are you going to be doing with that?

Sam Bankman-Fried (2:54)

Yeah, so it's I think we're looking good on the yacht front. Don't need any more there.

But no, acquisitions are the biggest answer. And, you know, I think especially as crypto starts to bleed into the rest of the financial ecosystem, there's more and more points of overlap and potential, you know, potential collaboration.

Joe Weisenthal (3:17)

Expand what you mean by that. So would you say crypto is going to bleed more into the rest of the financial system?

How much of that is OK? We know that all of the big banks or traditional brokerages, they're like thinking about like, well, what is their crypto play? How are they going to get in on this action? How much of it is are you talking about that? And every day there's some new announcement from like a legacy institution about something they're doing in the space, as opposed to crypto itself encroaching on areas of business, lines of business that we think of as traditional, where perhaps crypto has a potential to usurp some of that activity.

Sam Bankman-Fried (3:59)

It's primarily so far been the former. And some of this is the sort of traditional highly regulated financial institutions starting to dip their toes in. Some of this is also fintech. And so, you know, I mean, when people say fintech, there's sort of an increasing chance that they're referring to a crypto company over time. But even outside of that, many of the definitely not crypto companies in fintech, a very large fraction of those are reaching out to you talk about.

Imagine that you're some customer facing fintech business, right?

And you don't offer Bitcoin right now. What do you think the most frequent request you get from your customers is? It's definitely to add Bitcoin.

Tracy Alloway (4:40)

Matt, what's your understanding of what FTX actually does? Because Joe and I have spoken to Sam a few times before now. I think we have a decent idea, but what's your impression of it?