The Booming Crypto Use Case That's Happening Right Now

Joe Weisenthal (0:03)

Bloomberg Audio Studios.

Tracy Alloway (0:05)

Podcasts, radio, news.

Joe Weisenthal (0:21)

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

Tracy Alloway (0:26)

And I'm Tracy Alloway.

Joe Weisenthal (0:27)

Tracy, we're recording this August 6th. The coins have been falling, the cryptos.

Tracy Alloway (0:33)

That's right, the coins have been falling. Let's see, I'm bringing up Bitcoin right now. Let's see, it's down from a little over 72,000, and it is now down to 56,000. So, fun times in crypto land.

Joe Weisenthal (0:49)

There's sort of two things. We have not done many crypto episodes. I think we did one a couple of months ago with a member of the Odd Lots Discord talking about trading. The thing that's really stood out to me about this rally is since 2022 is, I have to say, I've found it kind of boring, and the reason I've found it boring is sure, the price has gone up from the lows and that's always exciting. But unlike even 2021, 2022, when people are talking about DeFi and Web3 and stuff, I just feel like there hasn't been much new or exciting narrative-wise within crypto, and so there's not even a thing to shoot down right now.

Tracy Alloway (1:29)

I agree that none of the narratives have been very interesting. However, the thing about Bitcoin especially is the narratives always keep coming, and that's the thing that I find fascinating about it. So, let's see, last year when you had the banking drama, people were pitching Bitcoin and some other things as like safe haven from the financial system. And then fast forward to late last year, suddenly they are the beneficiaries of the financial system, because everyone's excited about the ETFs coming on stream, and BlackRock is going to buy Bitcoin and all that stuff. And then fast forward to this year, and it's like a Trump thing now.

It's so funny how much the narratives shift and are often very much at odds with each other. But the reason that can happen is because some people might argue that like Bitcoin is kind of this weird post-modern thing, that it's just a token, like it's just a symbol, and people aren't really using it for anything other than betting.

Joe Weisenthal (2:37)

You know what cryptocurrency actually has retained a real store of value property?

Tracy Alloway (2:41)

Tell me.

Joe Weisenthal (2:42)

Tether. I'm looking at it on the screen. It's a dollar right now, and it's been a dollar forever. So you know, in a circle, USDC also very big. The big stable coins have so far proven to in fact be stable.

Tracy Alloway (2:56)

Some caveats there. I mean, we still remember 2021 and early 2022 when there was some discrepancy there. But yes, okay. Stable coins by and large have remained stable.

Joe Weisenthal (3:08)

And I do think, you know, one of the, you know, as you mentioned, narratives in crypto are always shape-shifting, always evolving. But one of them has been this idea that stable coins, specifically Nick Carter, who we've had on the show in the past, has been pushing this a lot, which is this idea that like stable coins and the ability to transact dollar denominated assets anywhere you want, that'll be the killer app of crypto. And to me, it's like, I'm always like a little unsatisfied by it because it's like, well, you're still like...

Tracy Alloway (3:38)

Venmo exists, Paypal exists.

Joe Weisenthal (3:41)

And then also those dollars at the stable coins, at least the centralized ones like Tether, like USDC, they're in a bank somewhere, right? So you're still relying on existing legacy financial market infrastructure. And if your whole point is to get away from that, then isn't it kind of like cheating to say, oh, crypto's killer app is going to be dollars that you hold in a regulated bank.

Tracy Alloway (4:04)

Yeah, dollars that are like backed by T-bills.

Joe Weisenthal (4:07)

Yeah, that's right.

Tracy Alloway (4:08)

Are the big innovation here. Okay. Well, I think we should get into this because as you say, stable coins, they're still around contrary to what a lot of people were expecting, especially with something like Tether, which has just behaved very weirdly over the years. And there are a lot of questions there about what exactly is backing their stable coin. But you're right, still kind of stable. People are using them, some people. So we should talk about it.

Joe Weisenthal (4:34)

And there's one other reason to talk about stable coins, which is I think there's this view that if crypto were to ever pose a systemic risk to the actual financial system, it's not going to be Bitcoin volatility. It's the lesson that we all learned in 2008-2009, which is that systemic risk comes from the assets that you don't presume to be volatile. And so this is a reason why legislation exists about regulating. Should they just be regulated like money market mutual funds? Things like this question, because we know that you really get into trouble when assets that are supposed to be dollar good or triple A or whatever don't behave as such. And so if there's ever going to be a time where there's going to be a link between the real economy or the real financial system and crypto would probably be something with stable coins.