Jarrod Loadholt, a partner at the law firm Ice Miller LLP, joined Wake Up With Cheddar to break down what's causing the current major crypto crash with Bitcoin and Ether both falling more than 50 percent below their recent highs. "Some investors are pricing in what's very likely to be the end of loose monetary policy," Loadholt said, pointing to the likelihood of the Federal Reserve shortly reversing course on pandemic-era easing. He also went into what the future holds for cryptocurrencies.

Wake Up With Cheddar

Behind the Crypto Crash: More Than $1 Trillion Erased as Bitcoin, Ether Plunge

let's bring in Jared load holt partner over at ice miller llp jar. It's such a pleasure to have you here. Thanks so much for getting up early with this this morning as, as you just saw Bitcoin down more than 50% from november alone. What's the reason for this? Why is it declining so much? Well, first, good morning and thank you for having me. You know, I think you know, one of the reasons is we see the Fed on tomorrow. I think some of the open market activities start tomorrow and I think some investors are pricing in was very likely to be the end of loose monetary policy. And so I think what we saw with Bitcoin last year, some of those increases I think were attributable to some of the pandemic relief in the very loose monetary conditions that we saw, we also have seen it involved in regulatory landscape. I think major announcements in china and Russia I think have had pretty significantly affected Bitcoin and other cryptocurrencies. So I think the combination of changes here in american monetary policy, interest rates are likely increasing. I think a number of times over the course of this year. Uh, and investors selling things off. And again, we also saw tech stocks on friday to. Um, and so I think the combination of these things have forced, I think some investors to force their hand and fly to safety. Okay, well, with that being said, I mean let's just say, You know, the Fed does do 4-5 interest rate hikes. Like a lot of people like goldman are predicting this year, does that then give you the indication that this is either gonna be a transitory situation with, with cryptocurrencies in terms of the fall or is this gonna be something we're gonna see at least for the rest of the year and at least until we see different stuff coming from the Fed here. I think for the rest of the year because I think we've seen interest rates so low for so long, they only have to go up from here. So I think what you are seeing is a shake off a bit in the market and the prices you'll start to see this year probably close to the prices that you're going to see in the future because again, I don't think you'll see interest rates staying where they've been, they've been where they've, they've been pretty low for a very long time. So I think some, some investors, some of them price that in, I think you're gonna see some investors come back into Bitcoin because the prices down. But I think we're in a range or in the neighborhood that will probably be in probably for much of the year. Do you expect that to be the case for all cryptocurrencies across the border. Do you sort of think that there might be one or two maybe like an ether or solana that might break through, given the fact that that Bitcoin is taking all the attention here. I think it would be sector wide. Um and I think you're seeing Bitcoin I think is the is the leader here, right? And so what you generally see in Bitcoin, you're gonna see in most of your other major coins and again, I think the same trends are at play. The interest rate environment is changing, the regulatory landscape is evolving. And again, I think some of the pricing that we saw last year, it was in part due to some of the activity we saw in the market because of some of the fiscal relief. We also saw people had money and they were playing in the markets. I think you saw a lot of retail investors playing in the markets with some of the relief funds that they received. So now that that's all gone now that you're seeing the interest rate environment change and you're starting to see, I mean you've got china and Russia to some of the largest markets clamping down pretty significantly on the market. So again, I think this is a sector wide trend and I think we should expect to continue domestically here. There's reports out there that the White House is potentially preparing for an executive order, maybe as soon as february Jared when it comes to a comprehensive government strategy with the volatile swings we're seeing in cryptocurrencies, do you think they will make things worse or do you think that adds a little bit stability here, that cryptocurrencies need. I think long term it will add the stability, right? Because I think ultimately what the executive order is much likely to say, it's kind of what some of the agencies have already said they're going to do, which is they're gonna look into the costs and benefits and the risks associated with it. And then they will chart out, here's what we may do in the future. So I don't think you'll see immediate clampdowns the United States that you've seen in other countries. I think what you what you are seeing though is the Federal Government's administration saying, let's figure out what we're gonna do first, which I think, you know, that's ultimately, I think what you want government to do is to give us some thought, incorporate where people in the industry and investor protection folks. Let's think about what we're going to do first and then let's see what we can do to regulate. You also saw the Federal Reserve this past thursday, I think issue a report around a digital dollar, um which is again, I think far off from actually happening. But what you are seeing is the administration of Federal Government trying to figure out what they're gonna do. Um So, I don't think this will cause any immediate um you know, significant changes in the value of of of digital currencies. But it does signal, I think an evolving landscape here in the United States as well? Yeah, I'm glad you mentioned that report about the digital dollar in in the U. S. Because it was sort of inconclusive here, it's like they didn't really know if they wanted to create it or if it was going to be beneficial or not. Do you think that the government does create a digital dollar here? And how long do you think it is until we get it? I don't think, I don't think that's something that's gonna happen anytime soon. Because one of the conclusions you saw in the report was the Federal Reserve is going to look for a clear statement from Congress Ultimately as to whether or not they do it because it it seems like they don't believe they have the authority to do it now. And I don't think you've got 60 votes anytime soon on an issue that I think is this complex and is this new? I think a lot of members of Congress and their staffers are still figuring this space out. So, ultimately, what you saw to your point that the report did not draw a clear conclusion, but the report said, is here's some of the benefits of a digital dollar. Here's some of the risks. We'll figure out what's next. We ultimately, before we do anything decisive, we'll need a voice from Congress and we all know, I mean, that's Congress that will move quickly. So I don't I don't think we're gonna see a definitive statement on a digital dollar anytime soon. So I think there's gonna be a lot of thinking and talking and you see hearings and and statements from members of Congress and regulators. But in terms of definitive action, no, not on the digital dollar. I think the definitive action you're gonna see is going to see some more regulatory, here's how we'll regulate stable coins, right? Like I think you'll see certain small baby steps. I think this year from Washington, but I don't think you'll see anything drastic. No, I'm in the same boat with you. I mean, I don't even know if we can find 60 votes votes on what color the sky is right now. Exactly. Let let alone in digital we can't do voting rights. We probably can't do such a good point Jared, such a pleasure to have you here this morning, Jared load holt partner at Ice Miller LLP joining us this morning.