Dec 12, 2023

Bitcoin (BTC) is trading under $42,000, after suffering its steepest daily drawdown in almost four months on Monday.

Video transcript

Bitcoin is trading under $42,000 after posting its worst daily drawdown since August on Monday. Joining us now to discuss the crypto markets is CEO of Canadian crypto exchange wonder five, Dean Ska, welcome, Dean. Hey guys, thanks for having me. You know, we, we saw this selloff happen uh at, at a time when we had uh uh some strong economic data coming out of the US. Uh We're looking today at uh inflation for instance, really low compared to where it was a year ago at the same time. Uh We have so we, we're seeing interest rates falling in general over time. Did this sell off happen because of a, well, a concern about risk, let's say, or is it because of big players taking advantage, taking profits after having bought it in large quantities early on uh and, and helping to move the price up to where it was $45,000. Yeah, absolutely. I think it's likely a combination of a few of those factors and likely others. You know, you're talking about with Bitcoin and asset that two months ago was trading at $26,000 US and you know, for us to think about a 5% pull back on an otherwise uncontested, run up to 45,000. You know, I think it's not unhealthy and I don't believe it's a sign that, you know, the broader, um, you know, conditions have been negatively impacted and, you know, we think about, you know, the macro set up for 2024 you know, whether it's the Bitcoin ETF S or the H or some of the broader macroeconomic conditions. And, you know, we don't, uh certainly think that, you know, this, this pullback is a reflection of, of what's to come. So you're in the middle of it, you're trading, where do you see Bitcoin falling, uh going forward up until the end of the year and then from the end of the year uh to the, the beginning of 2024 to the end of 2024 let's first start with the, the next couple of weeks here. Uh Where, where are the, where's the demand coming from? Where do you see interest coming in? Yeah, we've certainly seen increased demand, certainly when you look at, you know, the last six weeks compared to, you know, the quarter prior. And, you know, a lot of the excitement, you know, starting to be driven by retail and spa trading. And I think that's a differentiator from what we've seen, historic, uh you know, excuse me earlier this year, you know, Bitcoin ran up from, you know, 37,000 US D at the beginning of the year to about 30,000. And we really didn't feel uh uh retail come back as, you know, the way that you otherwise would have expected what's different now is we're really starting to see retail enter the equation and really start to put pressure on, you know, the price of Bitcoin and other digital assets. You know, you look at salon as an example, which has seen an ex extraordinary run throughout the, the la later part of this year. You know, a lot of that has also been driven by retail. So we're encouraged by, you know, the demand that we're seeing the uptick in volumes and sign ups. And, you know, we think heading into the end of the year, you know, you're certainly gonna see the continuation uh around the excitement for the spot ETF S in the US and what that can mean for demand heading into 2024 Dean just on, on that note, I know Bit Buy and Coin Square both owned by wonder if I just reached a billion dollars assets under management. You talk about the ETF excitement here in the United States, but the ETF S have been available in Canada. So what do you think is driving this interest in Canada? What do you think are bringing these new uh investors to these platforms? Yeah. No, it's a great point. You know, I think uh you know, in Canada, we've had the ETF S for a long time, as you mentioned, you know, we look at the industry, you know, there will always be individuals that prefer more traditional products like ETF S and there's always gonna be a segment of the participants in the industry that want to buy spot and you know, have um more reason to do so through platforms like bit buy and coin square. And so, you know, we think um you know, the the the assets, you know, under custody hitting a billion dollars is a significant milestone as we're starting to start. Uh you know, it looks like a night uh a market cycle here. And, you know, we look at the ETF S as you know, so, uh you know, in a few different ways, one, you think about a year ago, this time, the industry is talking about FTX the bankruptcy and the unwinding perhaps of the entire industry. You know, a year later we're talking about companies like Blackrock building out products and investing in the digital asset industry, which I think in and of itself is a massive signal to the market that this asset class is here to stay. At the same time. You think about what a product like a Blackrock ETF can do with respect to broadening the participants that can engage with this industry. And, you know, we certainly think that it opens the doors for large institutional and, you know, investors that otherwise have been on the sidelines or waiting for products like this to enter the space. Ultimately, that drives increased awareness, ultimately, that drives increased demand on, you know, assets like Bitcoin and Ethereum, when ETF S or Ethereum roll out and, you know, from a Canadian lens, you know, we just think that that will increase the pie over time and bring more people to the industry. And as I mentioned, you know, there's always gonna be individuals or participants that prefer ETF products. But at the same time, there's going to continue to be those that look for exchanges like bit buying Coin Square does, does this uh does the Canadian experience tell us that one should potentially sell the news once I if an ETF is approved by, by the SCC? Yeah, I think this is going to be an interesting use case here because you think about the news in and of itself and you're talking about, you know, 5 to 10 spot Bitcoin ETF S uh going live at the same time, which is what everyone expects to happen. Uh You know, in this case, on the back of those products being launched, there is a real need to buy Bitcoin to support those products. And so if you start to see inflows into those ETF S, you know, those ETF providers have to actually go buy the Bitcoin. And so I, I, I'm, you know, I'm, I'm curious to see how this plays out with respect to, you know, uh selling the news, you know, you think about the E merge, you know, that was probably more of an example of a sell the news event. You know, here you're actually talking about a situation where there is actually going to be a need to continue to buy Bitcoin, which in our view, if these products are rolled out successfully will actually continue to put pressure on the price, which can be a very positive. You know, we talk so much about what's going on in the United States. On this show. Earlier this year, there were a few exchanges that decided to exit Canada because they deemed the regulatory rules to be a little too tough talk to us about from a regulatory perspective. Um How is that developing in Canada and how are you finding compliance and engaging with regulators? Yeah, absolutely. You know, Canada is certainly unique with respect to the crypto industry. When you think about it from a global perspective, Canada was quite early in terms of putting in a regulatory framework that would govern platforms like bit buy and coin square. And at the same time, they understood that it would be a starting point. No one expects regulators to get things right the first time. But really putting a framework in place and working with, you know, platforms like ours to find that balance was a really important step. You know, we think the Canadian market has matured quite a bit since then. You know, you think about, you know, 2022 is an example in some of these international platforms, whether it was Voyager Celsius FTX, you know, the list goes on, but none of this activity originated in Canada. And we think that's a really good reflection of the regulatory environment that, you know, has been put in place here. You know, certainly when you think about the Canadian market, it's certainly uh smaller than some of the other jurisdictions globally. And so what that means is, you know, you talk about over the last 18 months, you know, another one, you know, bear market and at the same time, regulatory compliance costs continuing to increase as a percentage of overall costs for these platforms and the impact can be significant. And so wonderly has been, you know, at the first of this really consolidating these smaller Canadian crypto exchanges. And we've acquired five of the 11 regulated crypto trading platforms in Canada over the last 18 months. You know, we think through that, we have created the economies of scale that are needed to, you know, certainly withstand the increased compliance costs that exist. And, you know, we think through our two operating platforms today that we're really well positioned, uh with respect to the regulatory environment here and our abilities to continue to grow those businesses. So with those acquisitions are, do you face any potential pressure if you, you're you're close to half the Canadian centralized exchange market here. Do you have any regulatory pressures that would keep you from expanding even further with other acquisitions? Um and taking on a more dominant uh market. Uh Are there any regulators saying, hey, look, you know what this is, this is too much control uh for one entity in Canada to have in crypto. Yeah, it's a fair question and, you know, certainly, you know, haven't really had that con you know, that directly conveyed to us yet. Uh You know, when you look at the global industry and you look at platforms like Coinbase and cracking, you know, they're still significantly larger than platforms like ours. And so, you know, we think about the industry in a global context, you know, certainly with respect to Canada, I believe we've done a really good job consolidating the platforms we have. Uh but, you know, we think um there's still plenty of competition in the Canadian market. We think there's still plenty of choice in the market for Canadian participants. And, you know, we're just happy to be, you know, the Canadian option for, for Canadians to, to, to, you know, use with respect to the the, you know, the evolving digital asset industry as a local name that can provide them trust and transparency and the comfort of using uh you know, our platforms, Dean. I gotta ask you quickly before we go, you mentioned increasing compliance costs. Are you able to give us a ballpark figure, what's it costing you to remain compliant? You know, I wouldn't really be able to, to provide a ballpark figure there. You know, I just say you think about the industry in the maturation process that I've sort of talked about, you know, the FTXS of, you know, the past and, you know, the Black Rocks and the ETF S and the institutionalization of this industry moving forward. You know, we think that, you know, well, certainly we embrace the regulatory side of this and, you know, the increased costs, if you will, we think that those will continue to put pressure on smaller platforms that don't have the same uh scale that we do. Um But, you know, certainly with respect to regulatory compliance, you know, it's something that has become a cost of doing business for us. You know, we've always had a long term view that regulation would be needed to continue to grow this industry. And, you know, we're just fortunate that we have good relationships with our local regulators and that there is a clear willingness to communicate and collaborate between us. You know, I think one good example before I go would be the staking license that bit by acquired in um you know, about a year ago, you know, today. And you know, that was a collaborative effort with local regulators to say, hey, this industry is bigger than spot trading. Canadians are looking to stake their digital assets and if we don't find the right balance, well, they're gonna look to offshore unregulated platforms to engage in this activity, which puts a lot of risk on those users and their assets. So, you know, we think staking is a really good example of how the regulatory landscape in Canada is continuing to evolve and, you know, with respect to the costs. You know, like I said, you know, we're fortunate where we have significant scale now and we're able to fully absorb those costs. And you know, we think the challenges, you know, uh that those costs can impose would be on smaller platforms. All right, Dean, we are going to have to leave it there. Thanks so much for joining us this morning and shedding some light on Canada, I'm Canadian. So every time we get to talk about Canada is a good day for me. Thanks so much for joining. No problem. I appreciate it guys.

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