The crypto winter is coming -- or is it already here.  This week, Bitcoin and Ether, the two most valuable crypto currencies, fell to new 18 month lows.  On Wednesday, the overall global crypto market was down by nearly 27% over the past week.  Meanwhile, one crypto exchange is feeling the brunt of the crypto sell-off, and is responding accordingly.  Coinbase revealed on Tuesday it is laying off 18% of its workforce.  So, what triggered this crash and is there any relief in sight for crypto holders.  Anthony Georgiades, Co-Founder of Pastel Network and General Partner for Innovating Capital, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Crypto Crash Continues as Bitcoin, Ether, Broader Market Reach Historic Lows

the crypto crash continues both Bitcoin and ether falling to new 18 month lows. And the overall global crypto market has dropped by nearly 27% in the past week. And one crypto exchange is feeling the brunt but is responding coin based revealing yesterday it is laying off nearly 1/5 of its workforce. Joining me to discuss is Anthony Georgiadis, co founder of the N. F. T Blockchain, pastel network and general partner for the technology asset fund, innovating capital. So what triggered this crash? And is there any relief in sight? Yeah, thanks for having me. I mean, look, the first thing I think to understand is over the long term, the crypto markets not going anywhere. What's important to understand is that what we're seeing right now is very different than the 2017 2018 crypto crash, which is probably more akin to the dot com bubble right now. We're seeing a monetary policy driven contraction. You know, I mean at the time back in 1718 you had countless projects raising hundreds of millions of dollars with nothing but a white paper or a sleek roadmap. The markets seen a dramatic point of validation and adoption over the last few years. It's already serving critical use cases from enterprise applications like jpmorgan acquisition by sovereign states like El Salvador, you know, flash forward where we are now, the markets developed critical innovative technology finding product market fit and we're working on infrastructure to onboard a billion users moving forward. That being said, you know, granted in the short term, near minded investors really need to be careful in terms of speculating on digital assets. You've had an inflow of defi N. F. T. S and very irrationally exuberant assets in the space itself in the future. There's no doubt that this is going to be a sustainable market class Overall. The reality of the situation today is that crypto has been highly correlated with a debt based, non free risk asset market market itself. When money is cheap, it's been super easy to speculate and make bets on this sort of technology future. You have low interest rates, high flow environments, meaning that people can pay multiples and really kind of fomo into a lot of these general assets itself. So I just wanna know coin base is laying off 18% of its work force, executives are saying there's a recession in a crypto winter coming. So what do you think of their decision to do this? Right? You know, it's funny, it's as things have really taken off and people were going into a hyper growth mode, you have to react in the same way. Don't fight the Fed, don't fight the Fed as you take the stairs up, don't fight the Fed as we take the elevator down. And I think they're taking an aggressive stance here and saying, look, we went to a hyper growth mode, we probably hired and put the car in front of the horse here a little bit. We need to be thinking through the next 12, 18 24 36 months where going out into the capital markets is going to be a lot more expensive raising external capital is going to cost a lot more for us. And so how can we basically better protect ourselves? Our core technology, our core product offering, our core user base less focused on continuing growth and more focused on maintaining what we have here. And I think coin base is a great example of what we saw in this last cycle with F T X and crypto dot com, you can really pay to acquire users. There's maybe not any sort of intrinsic technological differentiation with one exchange over the other. Um and so that is a one interesting point in terms of a lot of the froth that's been into the market overall. Um and a lot of the excitement around retail trading, retail driven volume and whatnot that's really taken us to this kind of point of capitulation. So it's interesting that you said that though, because crypto exchange Finance revealed today that it has opened 2000 positions for hiring. So what makes the two so different? Yeah, So been ince's a very distinct and interesting exchange. I've definitely been um interested in terms of what they've done with a lot of the actual technological development, they have the entire finance labs team, they have an entire really incubation suite as well. Um, so been, it's has really positioned themselves on the forefront of basically being a quasi VC fund in the space, especially in a lot of the APAC region as well. So I do think with finance granted, they're not necessarily in a lot of instances under the tight regulatory um constraints that coin based might be as well. So it's a little bit easier for them in terms of an incremental cost to acquire a user in a pack might be much more negligible than it might be in in the States as well. The other point to that is what is the actual overall total adjustable market that they can continue to penetrate? I do think that in the U. S. And north America, it's highly possible that we've reached an inflection point in terms of overall retail penetration, we might not necessarily have that in terms of the different demographics and geography that finances after as well. Okay, so let me ask you, let's talk about the users for a second because there's concerns around not being able to withdraw money from crypto exchanges during the crash. In fact, finance paul's withdrawals for a few hours on monday the Celsius network has halted withdrawals and has not said how long it will last and coin base say that users could lose all their crypto holdings if the company ever went bankrupt. So what are your thoughts on this? We knew that we knew that, but for those users who don't know that. What are your thoughts, you have the same counter party risk on operating on any centralized exchange as you might necessarily working in a traditional brokerage house, especially as the industry started to come off the ground in the seventies or eighties, you dealt with the same counter party risks. You still deal with those counter party risks today, granted those counter party risks are a lot higher in the crypto space, particularly given the reasons you mentioned now, it's up to, I think a lot of the more stringent and tighter regulations to come into play here, make sure that any sort of assets are adequately collateralized on exchanges, you don't run into situations of potential insolvency. Uh, things aren't necessarily being over collateralized or necessarily dispersed in ways that we might have seen with Celsius over the last few days here. Now, the been in situations a little bit different. They halted trading on that exchange in particular to more Blockchain and network related issues, not necessarily anything related to potential solvency concerns on the exchange itself here. So, granted anybody that's coming into the market itself needs to understand that counter party risks are high, granted high risk, high potential reward over the past. There has been that overall risk premium that's been baked into crypto assets, as obviously, we're moving into a market where you have liquidity drying up over lover accounts that are basically getting liquidated left and right here. That is continuing to exasperate the problem itself that's gonna play into it. One of the thing with these exchanges to is that I think people haven't necessarily taken into consideration here is you have a highly the high amount of respected funds and market market makers that have caught themselves in kind of high risk positions. As if risk books over the last cycle have been turning a shoulder for the last 18 months, a month or so to let the music go on. If you take certain market makers, those who might drive a disproportionate amount of exchange volumes. Typically they're meant to be market neutral. Many have found themselves net long certain assets. So it's kind of a double whammy. They're drying up liquidity on the market and slowly getting back to a net neutral position. So they're actually off boarding more supply onto the market itself. That's providing for obviously increased execution risks as well as reducing bid activity. And obviously that's led to this kind of compounding effect in terms of what we've seen in the sell off. All right. Listen, Anthony you broke it down for us beautifully Anthony Georgiadis, general partner at Innovating capital and co founder of pastel Network. Thank you so much Anthony for sharing your expertise on this