Breaking down Bitcoin’s catalysts this week

Yahoo Finance’s Myles Udland, Julie Hyman, Brian Sozzi, and Dan Roberts discuss the market action for bitcoin.

Video Transcript

JULIE HYMAN: Bitcoin. We are watching it again this morning as we have all week, as it has had an incredible climb again, and a lot has been packed into this week when it comes to cryptocurrency news. It was only on Monday, seems like a lot longer go than that, that Tesla revealed in a filing it had bought $1 and 1/2 billion in Bitcoin.

We also learned this week that MasterCard was exploring accepting cryptocurrencies as payment. BNY Mellon said it would support crypto-trading, potentially, and then CNBC reporting this morning that Daniel Pinto, President of JP Morgan, said– they didn’t quite say that they would be supporting crypto-trading. It was more, sort of, well, if our clients want it, then we’ll have to do it. It was more of a reluctant acceptance of what’s going on out there. We also talked, remember to Michael Sonenshein of the Grayscale Bitcoin Trust this week.

We heard from Michael Novogratz as well, both of them saying that there is more risk at this point for professional investors not investing in Bitcoin than investing in Bitcoin, so that has been a flip. Not sure I’ll believe that until we hear people who are not Bitcoin investors making that kind of comment. Dan Roberts is back with us. He’s been following all these developments. Also, and this sort of narrative about adoption, that’s the big buzz word on the part of Novogratz and others. Adoption, adoption, adoption.

DAN ROBERTS: Yeah, I agree.

JULIE HYMAN: I don’t where the tipping point is or if we’re already past it.

DAN ROBERTS: I agree with that being the buzz word, Julie, because you know, it’s one thing to just buy Bitcoin for your balance sheet as an investment and hold onto it. That’s fine, and some of these companies are doing that. Obviously, that was part of the Tesla news, but more interesting is the companies that say that they want to accept it as payment. Now, of course, a fair retort to that is, do people really want to use it as payment at a time when the price is soaring? Probably not. They don’t want to spend it, but Tesla says it eventually hopes to have customers use cryptocurrencies to buy its products. Maybe that means cars. Maybe that means something else.

And then of course, you mentioned MasterCard, BNY Mellon, and then just this morning, I thought you were going to mention yet another one, Uber. The CEO, Dara Khosrowshahi in an interview saying that Uber doesn’t necessarily plan to buy Bitcoin as an investment, but it is considering allowing customers to pay in cryptocurrency on Uber for rides, as well as for Uber Eats.

Now again, no one really wants to spend their crypto right now, but that’s what we mean when we talk about adoption, and I think that’s the most significant step. You talk about PayPal. That’s adoption. Talk about Square, and that is sort of the rising tide right now that appears to be lifting other boats. I mean, gosh, as you mentioned, it was just a few days ago, we were sort of saying, who’s next? And then we woke up yesterday, MasterCard was next. BNY Mellon was next. Twitter’s CFO went on CNBC and said that Twitter is considering adopting crypto and buying Bitcoin for its balance sheet.

So there’s a parade happening right now, and I think you’re right to distinguish between kind of pure play crypto companies. Of course, those people are bullish, and non-crypto tech companies. It’s those companies that when they come out and make a move, I think that’s what kind of really grabs people’s attention.

MYLES UDLAND: But you know, Dan, it’s funny you mention adoption with respect to the spending of it, because we’ve talked for years about how that narrative of Bitcoin only works when people go out and spend it is completely flawed and not really what we’re talking about. And so I feel like adoption is once companies, and I found that, the Khosrowshahi comment curious, because it’s like, to me, adoption is we realize Bitcoin is a good part of an investment portfolio, not that we would want to see customers using Bitcoin. So I mean, I do wonder, like–

JULIE HYMAN: I mean, to be fair, Krosrowshahi’s comments were very tentative, right? He was asked. He didn’t volunteer that information, and he kind of said, yeah, we would consider– you know, it wasn’t like, we are exploring this at this present moment. It was kind of like, yeah, if people want it we might consider it.

MYLES UDLAND: But he’s still talking, he’s still talking about Bitcoin, though, in a way that is not really, in my view, part of the serious conversation. There’s no serious conversation about, is Bitcoin going to replace the dollar? It’s, is Bitcoin something that has to be part of an investment portfolio?

DAN ROBERTS: Well, that’s right, and you guys, I think it’s fair to point out that originally, the white paper on Bitcoin was peer to peer electronic cash system, and people aren’t using it as cash. Now, of course, all the bulls just say store value, digital gold, that’s fine, that’s good enough. But I think the truth lies somewhere in the middle. When people try to dismiss Bitcoin because they say, well, you can’t really spend it most places. I can’t buy my coffee with it. Well, that’s not the point. That’s fine, and technologies evolve, but it’s also true that if the only excitement in use case is buying it as an investment and holding onto it, well, that’s not very exciting either.

So when I think of real exciting adoption, it also really extends to a third bucket, Myles, right, we talk about adoption of letting customers pay in crypto, adoption of investing in it for your balance sheet, and then a third bucket would be embracing this decentralized technology, you know, and banks talked about doing that a while back, but now we’re seeing decentralized finance and all kinds of new use cases and decentralized apps built on Ethereum. And that’s sort of the most exciting adoption, potentially, if there’s real day to day business use cases for it.

JULIE HYMAN: And what’s interesting about that point is an analyst flagged to us earlier in the week when Jack Dorsey was asked about crypto on the call for Twitter, that’s where he took it. He talked about a decentralized technology potentially helping with content curation on a Twitter. He talked about that the model has been centralized. It’s Twitter deciding with its algorithms who sees what, but what if the control for that was put in the hands of the users? Now, didn’t sound like they’re actually building that, but he sort of brought it up as an interesting idea.

But to come back to the payment question for just a second, Dan, I still have trouble understanding how exactly it would– if I wanted to buy a Tesla with Bitcoin, like, how is that going to work when the value– like, how is it a viable currency when the value fluctuates so much? You know, how do you, how are you going to do the transfer? How, you know, I just don’t– I have a hard time wrapping my head around just concretely how that’s going to work right now.

DAN ROBERTS: Well, and to be clear, I do not think right now it’s a viable day to day currency. Certainly not. If you’re a company and you’re going to accept payment in crypto, you better only do it because you are ready for the volatility and you are trusting that eventually the value is going to go up. Otherwise, right, it’s very simple. Why would a company take something that tomorrow could be worth a lot less money? But clearly, if you’re Elon Musk, if you’re Jack Dorsey, if you’re Dan Schulman, you believe in the future of this stuff.

And I guess I’d point to what Jack Dorsey said ages ago when Square first kind of openly embraced Bitcoin by adding crypto to its cash app, he said, I believe Bitcoin is going to be the currency of the internet. And I think that summarizes it nicely, because it doesn’t just mean that you’re paying with it. The currency of the internet means the underlying tech, that it’s going to be used for a lot of things, but you’re certainly right, Julie, if you’re going to pay in crypto, they better reduce a lot of that friction. It has to be completely frictionless. It can’t be like when you’re signing up for a subscription to a paywalled news site, and you have to enter your credit card and enter your address and all the information, but that’s what some of these new coins are hoping to do is to allow frictionless micro-payments online.

BRIAN SOZZI: Dan, let me read this comment to you. It came from PayPal CEO Dan Schulman at their investor day yesterday. He said, quote, “This is a once in a multi-decade opportunity where the fundamental rails of the system are going to be redefined, and we have a chance to help shape that.” Now you have covered Square and PayPal for some time. How far ahead are those two payments companies compared to others?

DAN ROBERTS: Well, I would put Square at the forefront, and you know, this kind of Bitcoin bull run was accelerated by the PayPal news, because PayPal is certainly probably better known. It’s more consumer facing. Square’s a little, kind of, enterprisey and maybe not everyone knows it even though everyone has probably swiped their credit card on a Square fob. But it’s really Square that has been doing this since 2018 as I mentioned. Square was the first mover here, and of course, we’ve talked about Twitter saying that it’s considering this week, that to me was, ah, at long last Dorsey’s other company eyeing crypto, because Square has been doing it for a while.

Square is the one that behind the scenes has been not only facilitating buying and holding a Bitcoin in its cash app, but then was the first, kind of, big name mover to just buy Bitcoin as an investment for its balance sheet. Square bought $50 million worth, which at the time was only 1% of its cash.

Of course, Tesla makes more noise, because Tesla spent 10% of its cash on buying Bitcoin, but I would look to Square as one of the companies that really is going to move the needle here in terms of big name fintech companies pushing widespread adoption. PayPal’s in that, too. And we’ll see how many people really use that. Of course, Dan Schulman in the most recent earnings report said that they’ve been delighted by kind of the rate of adoption already in its PayPal wallet, but I still would bet you that’s been pretty small.

MYLES UDLAND: Yeah, maybe it’s just because I, and maybe I speak for myself here, but working at a company like Yahoo Finance, you see the world through the lens of the way companies do, right, so you think about investments first and foremost, and to me, the fact that big companies and big institutional managers now view Bitcoin as a necessary investment to say we have covered all our bases is more confirmation of the space than I think even the biggest bulls could have hoped for a couple of years ago, and I mean, you think about it this way, like, you don’t have a website that covers the dollar. You have a website that covers things that happen because of the dollar. So it’s not about how you use Bitcoin, it’s about the derivative plays on the ways that crypto works within the broader financial system that creates interest and demand and so on and so forth.

DAN ROBERTS: Well, and just lastly, if we have time, I would say to that, Myles, from a Yahoo Finance perspective and from the financial investor perspective, that’s certainly kind of the key thing right now is the institutional investment. Everyone says, oh, this current round has been driven by institutions. That’s fine, and that’s true, but I would also say that the excitement in crypto right now has been accelerated by, kind of, the retail investor revolution.

You know, it’s all tied up in one kind of convergence that the pandemic has really added to. It’s regular people, just, never before– even right now, much more than in the 2017, kind of, hype cycle have I heard from as many regular people interested in this space, wondering about it, so you’re right. It’s Wall Street institutions, and that excites people as an investment, but I also think that you’re going to see adoption by regular folks who wonder, well, what are the different use cases here and should I be into this stuff? Should it be something that I understand and want to learn about?

JULIE HYMAN: Yeah, if we were riding in taxis right now or Ubers, the drivers would be certainly asking us about this stuff. All right, thanks so much, Dave Roberts. Really fun conversation there on crypto and on Bitcoin.

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