Over on X, crypto investors grumbling as stocks make new all-time highs on a daily basis while crypto prices still slump.
The Clarity Act could be the industry's next biggest catalyst as it could unlock trillions in capital.
And joining me here at the Stock Exchange to discuss this and more is Bruno Caratori, co-founder and Global CEO of Hashdex.
Bruno, thank you so much for joining us.
Thank you for being here this morning.
Great to see you, Johnny.
So Bruno, let's get your overview on the U.S. macro backdrop and how it's impacting crypto.
What is the Q1 market post review about the key factors that weighed in on prices and the Nasdaq crypto index?
So our team brought this up, I think, really well in that piece.
The Q1 was a volatile period that included geopolitical tensions, first with the tensions in Iran building up.
There was uncertainty around the nomination of the new Fed chairman.
And all of this introduced what we think are short term pressures that certainly gave volatility to crypto and even other asset classes as well.
So let's talk about those three factors, the Iran tension right now, the new Fed and the actual war itself with Warsh taking over as Fed chair.
Expand more deeply on his Q1 impact on crypto.
And also, if he's bullish for the industry moving forward.
It's worth noting, I think, Johnny, how in different moments crypto will respond to different factors driving its returns, right?
And Warsh is, of course, going to be an important lever in the liquidity of the market.
And as liquidity is injected in markets, Prices of all assets, not just crypto, tend to rise.
This was one of the factors that we saw play out during around the time that the whole discussion was happening around wars.
We don't think that this is something as important for the long term of crypto, but it's certainly something that affected prices and continue to.
So let's talk about your position regarding leveraging, we're seeing the crash take us through this.
Crypto is well known for having a lot of venues in which a lot of leverage builds up.
This is, I think, in part a result of the fact that a lot of crypto infrastructure, the market infrastructure in crypto has been built outside the purview of the well-established system, the regulators.
When this leverage builds up and certain price dislocations happen, we see a lot more volatility in crypto.
I think the latest great example wasn't even in Q1.
Back in October of last year, when Bitcoin and other crypto assets were at all-time highs or very near, there was, I believe, one tweet by President Trump with regards to a tension with China around the export of rare earths that precipitated a tremendous fall. one tweet, and that was mostly due to a lot of leverage being built into the system.
So, if you're in crypto, you know that leverage will cause volatility, and that's par for the course.
It's one more reason for you to have a long-term view, to be disciplined and calibrated on how you build positions, so that you're able to serve the long-term trend, which is where the opportunity is, without being exposed to these short-term dislocations.
So let's talk about different asset classes and their performance amid the war.
What did you see?
I think it's interesting.
We're living through a very unique moment, I would say, Johnny.
At the surface, you just commented on stock indices perhaps falling a bit today.
But I believe most of the major indices are at their all-time highs, right?
The S&P, the Nasdaq 100 for sure.
It's important to realize how despite this fact, this is not a risk-on environment.
It is still largely a risk-off environment.
Interest rates have still been really high in the U.S. and abroad.
Number one, geopolitical tension is still at a high level. stock indices are being driven mainly by the Mag7, mainly by the hyperscalers, the companies that are surfing this AI wave.
But otherwise, there hasn't been a big risk on sentiment that would affect the prices of both crypto and other risky assets.
So let's talk about your point of view regarding the difference between the initial reaction and the long-term reaction.
So expand on this divergence.
I think it's important for the public to understand that crypto, as an asset class, it should be faced as a long-term bet in a technology that, not over weeks or months, but over the years, will find use, will create economic value, and a good part of that economic value will accrue to the tokens.
Again, this happens over years.
In the short term, other factors will be more prominent in driving the returns.
Factors that affect liquidity, factors that affect risk appetite.
We as we talk to our audiences out there, financial advisors and clients, this is a mindset that we try to instill.
Be aware of the real return drivers that are poised to make crypto grow by orders of magnitude, but that will take a long time and do not get distracted by what happens in the short term.
Bruno, let's talk about the Clarity Act that's being used throughout the week.
What impact are you expecting to see on the crypto industry?
This is a remarkable week, Johnny, for the crypto industry.
I think we can argue that in the past two years, we've seen a 180-degree shift in the regulatory, and I should say, just the government attitude towards crypto in the United States.
It's a new era that started with the approval of the ETFs, first of all.
Last year, the Genius Act passed, and clarity is now coming.
Clarity is not just one more step.
We believe clarity is by far the most fundamental step that will happen on the legislative and regulatory fronts in crypto.
It's something that's comparable to the Securities Act of 1933, which in the U.S. sparked a whole century of innovation, a whole century of capital formation.
Clarity will give, among other things, two very important things for the crypto ecosystem.
One, a framework for transparency and disclosure that will level the playing field, and that will give all market participants the assurance that this is a legitimate space to be in, as an investor or as a service provider.
Secondly, and perhaps most importantly, Clarity provides a framework to close the economic loop on blockchain networks, being able to generate value, generate revenue that accrues to token holders, which we think is the most important mechanism to spark the new era of innovation in crypto.
So definitely a big thing going on this week.
So we're also right smack dab in the middle of Q2.
Where does your company, where do you see the industry standing now?
It's been, paraphrasing our market post, it's been a remarkable era for crypto.
We think that the next two years are going to be of great progress for the industry.
We've been talking to advisors across the globe, not just in the United States, on how this is a great time to get exposure to the asset class with the discipline that one needs.
Our company provides a great solution for advisors.
It's an index product that gives them access to the entire crypto market in a very high quality way.
And we think we're poised for great success in that.
Let's talk about your outlook for prices this year.
What are you seeing?
What are you thinking?
In crypto, it's always hard to make short term predictions on prices.
Johnny, I would say that the passage of clarity can be one catalyst for the next leg up in prices, especially in assets outside of Bitcoin. because these are the ones that have had a symmetry with regards to regulatory support.
So everything from the Ethers and Solanas and XRPs to the rest, with clarity passing, which is not a given, we think there's high chances, but not a given, these may not only recover their all-time highs, but show us new all-time highs by the end of the year.
We also judge that we need to see continued adoption of the crypto use cases.
The ones that we're seeing now, stable coins, tokenization, prediction markets, digital IDs.
But not just this, the ones that entrepreneurs are still dreaming about for crypto to grow by the orders of magnitude that we envision growing.
So let's talk about investing.
Let's talk about the contrast between Bitcoin investing and index investing.
An amazing question, Johnny.
It's very easy to put all the cryptos in the same basket as if they were just different flavors of the same thing.
And in fact, they are not.
Bitcoin turns out to be very different from what Ether and Solana and other smart contract platforms are.
They are different from the tokens that represent applications, such as the ones that underlie lending protocols, decentralized exchanges.
What we think, is that blockchain networks, this has been the vision of Hashtags from the beginning, blockchain networks. will revolutionize how societies do a lot of things, including storing wealth, including participating in markets.
And this is the opportunity that we've always wanted to give investors, the opportunity to invest in the entire crypto thesis, not just on Bitcoin, which has a thesis of an emerging store of value, something that will be akin to what gold is nowadays.
We think that there's a lot more to be explored, and the index provides this.
Bruno, separately, we see that the ratio of DEX spot volume compared to central exchange spot volume back on the rise over 24% at the end of Q1.
What's your overview on this?
First of all, this is a remarkable feat.
I think it speaks to how DEXs have utility.
What we've seen in Q1, which is interesting, is how the volatility of traditional markets have fed into the growth of DEXs.
A number of these decentralized exchanges have been very active during times in which markets were closed, during nights and weekends.
And traders or other market participants needed to take a stance, a position in oil or in some other asset that's being greatly affected by what's happening in the geopolitical arena right now.
And we've seen DEXs come into the rescue.
And that increase that you just mentioned is certainly related in a good amount to this fact.
Bruno, last question.
Overall, what is your outlook for the rest of the year for your company and just for overall the industry?
So, Hashtags is in a great position to continue being this provider of the leading index product to the U.S. public, to financial advisors, and investors everywhere.
Our product has been live since last year.
It was the first product to give investors, as an ETF, a proper exposure to the entire crypto asset class.
Our product is built on the NASDAQ CME Crypto Index, which is poised to become the benchmark of the asset class.
Just this week, the CME announced that it will launch futures on the NASDAQ CME Crypto Index, which we understand will contribute to the entire ecosystem.
So we think that the investors and advisors that have been adopting our product will be very well served by this coming year.
Awesome.
Well, Bruno, thank you so much for joining us today.
