Kevin O'Leary: We're Not at Crypto Market Bottom Yet
No crypto markets are not boring right now, and neither is our next guest joining us now to discuss. The crypto markets is none other than kevin oleary. Mr wonderful himself, co host of shark tank hes, also strategic investor of wonder, fi, but guess how they got that name and chairman of oh shares, investments and beanstalk good morning kevin great to be here. Thank you glad to see you um, of course. This week you said to coindesk and im gon na quote: you dont get a bottom until you have an event and then a few ellipses here afterwards in the crypto world, we need something to go to zero. Well, luna went to zero or just about zero celsius. Is having issues giving their funds back to customers, as we just talked about and three hours, three arrows capital, which is kind of like for crypto, thats, institutional trading, right theyre having uh issues as well. Are we there yet? No were not um theres lots of presidents for this in history to get a bottoming in an asset class. You need a major player uh to basically be offside in the case of celsius. It is going to go to zero uh its over levered, its gated now, and the trouble with gating a good example would be a hedge fund. Every single customer wants to be liquid, the minutes you open the gate and so its its a self uh realizing outcome. It will go to zero itll have no assets but thats important its its.
You know its not enough its, not big enough im. Looking for something bigger somebody out there is in trouble, we dont know who they are yet um well find out soon. Itll probably happen. The next 30 days, some giant player, is going to zero, because this is the first time applying leverage to an asset class that most people assumed wouldnt, be this volatile but has proven to be volatile. Yet again – and i i say all this say and its important – that this happens – its bad for the individual investors, but in the context of of making this market more educated, more institutional, more stable, with better price discovery and less leverage. You need these players to go to zero, so celsius. Thank you for your sacrifice. Theyll go to zero, but theyre, not big enough theyre, a small bit player doing something really bad, using leverage to offer 15 to 18 percent staking which, of course, is going to go to zero, but thats. Okay, because now other investors. After watching what celsius did or what luna did will not favor those structures, they will not put new capital to work their markets very smart that way, so by creating these events, taking these these to zero. That gives you the you know. This is like 60 billion, including ust tara luna. They was 60 billion, and now that i know that sounds clear. I know that sounds like a lot, but in the context of financial services, that is nothing even the entire.
You know under trillion dollar uh crypto market is nothing. We need its its really small in the context of where it could go, and so what what we need to have happen, and the interest is i was just before i came on with you. I was just talking to institutional investors in the middle east. There is so much interest in getting into crypto right now and they cant do it because they have no policy and theyre not compliant because theyre sovereign wealth funds and they dont have the option they have. No infrastructure for compliance to buy bitcoin and and so theyre really interested in you know putting one to three percent into bitcoin, which is the grand daddy asset. Given that its had such a price correction theyre very interested – and you know what does that mean in terms of demand? Well, if youre running a 900 billion dollar sovereign wealth fund thats a lot of demand, and so we dont have that in the market. Yet because we dont have policy, so when anybody says to me: oh, we want to remain unregulated, they dont get the joke were going to stay small and tiny, and fractional under a trillion dollars of assets is nothing its nothing. It could be multiples of that. If we could finally get some policy, a trillion dollars and but youre saying its a trillion dollars now and its and thats nothing, but it might be even more closer to nothing uh, assuming that there is this kind of blow up that youre predicting.
Should that blow up happen, where would you see the price of bitcoin, then i mean like when would be what you think is structurally, where things would be uh once this uh supernova event occurs? Well, we need two things. We need that we need that capitulation event. Uh and im sure were going to get it and thats a very good thing and ive. Given you the reasons why itll be chaos in the streets, kind of thing, bitcoin will probably drop down significantly. I dont know maybe another 20 down who knows its impossible to know, but again its a good thing, its the beginning of a bottling process. Then we need one of these bills, thats floating around congress right now, and i would suggest the one that im most interested in is the simplest to pass thats going to be the hagerty or toomey build that contemplates auditing stable coins, which is a really easy thing To do and would make it much and if we just could get some policy on one thing and it was stable coins. That would really be good because you would start to know with certainty that you get some movement from the institutional client to allocate now ill. Give you an example: you mentioned wonderful earlier yesterday, wonderful announced its all over the papers up in canada that the tsx, the premier exchange there invited them to list on the tsx the first time in history, a crypto exchange with a dealer broker attached to it has Ever been invited onto a an institutional exchange and the reason they did, that is theres, so much institutional demand in canada for product theres, a huge amount of demand and the regulator in the canadian market is a little bit more advanced than what we have stateside the Uae is very advanced as well: switzerland, england um.
These are other countries, australia, where you youre a little more advanced on policy, and these large institutional equity exchanges are asking to list. The shares of these dealer broker crypto exchanges. So i consider that all positive, quite positive, but i i think right now we havent found a bottom. Yet for crypto i have. I havent read the translation, let press yet so im just waiting for that, but nonetheless uh when it comes to uh this big event and it sounds like youre youre sort of dancing around it. Do you think that this event may involve one of the major stable coins? In other words, should they get this yeah? Should it get regulated uh and the like that there could be this. That supernova is that is that kind of what youre getting at here. I i am getting at that, but what will trigger the supernova is. Leverage is always his leverage every time there is a washout, its leverage and i dont know and and more its very opaque right now in some of these situations in these projects, how much leverage is involved? We know now that algorithmic stable coins will fall out of favor when you take luna to basically a zero people lose a lot of money and they dont want to do that again and thats. A good thing that its an educational process – thats, okay, we dont know yet, if, if today, you forced an audit on every single stable coin, the way its suggested in the proposed bills, which is simply a audit every 30 days and no asset with a duration.
More than 12 months so t bills, for example, average duration, seven months in the portfolio. We know that a stable coin, like usdc, has not broken a buck in the last 10 weeks. I mean the company has basically said: look, there is no regulation yet, but were going to really hold true to our mandate, which backed by the u.s dollar and its still a dollar, and so and – and i think the yield on that on 30 day contracts. Annualizes 4.5. This morning we use that product, corporately um, so im well aware of what it does every day and our compliance department looks at it and the companys been putting out statements every morning saying you know we are still a buck and whatever else, because theres so much Concern out there about all stable coins, but but im looking at ones that that maybe couldnt survive an audit and perhaps say it kevin. Do you are you talking about its not its, not right, because i dont know with certainty but im im pointing something out its? Not bad if this happens its a good thing, thats all im, trying to say because it educates the market gets institutions more interested pricings down, so much theres tremendous institutional interest, but no buying yet and weve really got to get policy but kevin. I guess my question is: why would the supernova event necessarily be good for crypto? Why wouldnt it just leave more people to be like enough with this crazy industry im going to go, try to get a discount on a tech stock or you know, theres going to be bargains in the stock market as well.
Why would it trigger more people to stay in the market? Theres other options out there, because you have to learn from history. Great capitulation occurs around events, the long term capital one i keep referencing was the bottom of the market. When that thing blew up, it blew up on leverage and it was chaotic, i think well get a couple of hedge funds. If theyre big enough um theyll be considered, you know catastrophic events and thats. The market always goes on. If, if something blows up in crypto it doesnt end crypto, the promise of crypto remains, but we really need it to to to get that. Bottoming process started were not there yet were in the slow grind down every day down another two and a half percent. Its very painful to watch what you want is you want that toilet to flush? Okay, if we have to go down 25 more lets, do it and then its a huge buying opportunity for those that have this stamina to take that kind of volatility? And then you reflect on it 18 months later saying that was the bottom, its always around an event. Thats all im, saying im, just being a student of history and its going to happen. Youll you will be reporting on it. You will be reporting on it. Youll, remember this conversation its coming to a theater near you, youll come back and talk about it im sure but um you keep mentioning the word.
You keep mentioning the word leverage um, which is interesting, because that was like one of the things that plagued the traditional financial market right, so its kind of interesting to see that story repeating itself in crypto um, but just on the regulatory side. You know you mentioned stable coins, but okay, say this sort of unnamed um i dont know giant, goes to zero. What are some of the specific regulatory actions that you think could prevent such a thing in the future? You did mention a bill, but i dont know if our viewers are are that familiar with with whats in the bill, so id just be curious to hear what you the most urgent regulatory priorities, both on the stable coin front and elsewhere. Like specifically, what needs to be done to prevent these kind of catastrophes going forward? Well lets just take a quick inventory of the regulatory environment right now for all viewers. Ive spent a lot of time in the last month on the hill. There are three bills to consider and theyre all bipartisan bills, which is very good. The granddaddy bill, the behemoth, 175 page uh infrastructure, if you want to call it crypto infrastructure bill, is, is cynthia llamas and gilderbrand. So a democrat and a republican proposing infrastructure across all asset classes of crypto contemplates everything, bitcoin ethereum blockchain projects, you name it nfts stable coins thats out there, and that is a very big bill. Its assumed that itll be split into three pieces when it gets tabled.
Sometime after the midterms thats bill number one thats, the big one number two is the one that i think gets passed. First, its going to be the hagerty or toomey bill which are identical. All they say is lets pick. One thing lets pick stable coins and the reason they want this bill and why both sides are interested in it. It contemplates a stable coin, backed by the us dollar, therefore creating the default currency of the globe. If this was adopted by multi jurisdiction, so lets say a usdc kind of stablecoin therell be more than just usdc. If this policy is passed, it would simply say you can create a stable coin, backed by the us dollar. As long as we can audit it. Every 30 days with total transparency and you have no assets supporting the coin. With duration, more than 12 months, very simple idea and thats no different than policy on an fdic, insured money market account in fidelity or schwab, for example. So the same thing would apply here now. If you wanted to be fdic insured and you are issuing a stable coin, you have to turn yourself into a bank, but that would also be permissible. So when this happens, youre going to see a bunch of players emerge and say: okay ill live with that regulation, and then i, as an investor and a corporate investor, an institutional investor would be the same, would say: well, theres slight differences between schwab and fidelitys money Markets or oppenheimers money market fund, but theyre all backed by the fdic insurance, so im going to put a portfolio out a third or third, a third im going to have all of them, and so that that would be the first thing.
That would be a very good thing for the crypto market and i think that can happen in q1 of next year and so im very supportive of those bills, very supportive of those senators. Many other private citizens are the same im. Not the only person going to washington each week. It makes a lot of sense to me and its in my best interest, because i want those products from my financial services investments. I would like to use a usdc like product for payment systems between my companies in different geographies makes total sense, so theres a real motivation and the senators and the politicians love the idea of making the u.s dollar default payment system its. It makes sense for everybody, so thats, very important, yeah, kevin, thats, thats, a really good point and – and you know, about stable coins, but just quickly like that. Specific regulation is not necessarily going to address a celsius type of situation right. What do we need for those kinds of scenarios? Celsius is acting on its own in the free market under the regulations that they started and they decided to pursue a leveraged strategy. They decided to put extreme leverage on. It looks like when it came time for a liquidity uh event they werent able to provide liquidity and the history of that the concept of gating shutting down is completely, and you noted it earlier. This is completely against the concept of decentralized finance. I mean if i had an account in there id be a pretty pissed off cowboy right now and im glad i dont, but but in in our the philosophy in our shop is we dont use leverage on highly volatile asset classes, whether its crypto or whether its You know small cap or venture stocks or whatever it is.
We just dont use leverage, because we dont know with certainty whats going to happen any one day when you use leverage as celsius did to provide those extraordinary yields for a short period of time. I think everybody went into it their eyes open so now their accounts are worthless. Thats. Okay, i keep saying its its a birthing thing, its its the beginning of a nation industry. The bad ideas need to be weeded out its its its taking the cancer out of the system, its important that they die its a good thing that luna went to zero because no ones going to do that again. Thats the whole idea and and just because basically yeah Laughter. No, but you understand my point of view, i think you understand my point of view. Youve got to scrape the patina youve got to strip the band aid off the wound.