Why China’s stance on crypto might hurt the market ‘long term’

CoinDesk Managing Editor, Ben Schiller, joins Yahoo Finance to discuss the continued roller coaster ride in cryptocurrency volatility as China’s crackdown continues to put constraints on the market and what the future of crypto might be as a result.

Video transcript

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MYLES UDLAND: All right, welcome back to Yahoo Finance Live on this Thursday morning. We see stocks here opening higher, but a lot of the attention this week, the most interesting moves in the market, have been what's happening in the crypto space. We've got an overview here of the space.

The moves on a percentage basis a little bit more tame-- a lot more tame, I should say, than what we've seen this week. Maybe a little bit of a respite is welcome for those in the space. But joining us now to talk a bit more about all of the crypto news this week is Ben Schiller. He's a Managing Editor over at CoinDesk.

So, Ben, I'm curious how, from your vantage point, like, what's the driving story this week? Because from our vantage point here at Yahoo Finance, mostly covering US public equities, it's just about the price of the different coins. From your vantage point, where is the interest from your readership and what do you think is driving in some of this price action?

BEN SCHILLER: Well, I think generally, we're in a bit of a low moment for the market. There's less interest in trading, generally than there was a few weeks ago. But the big news this week was coming out of China, which is, obviously, a very important market for both crypto trading and for the mining of Bitcoin.

And first of all, we had a number of provinces in China saying they were going to ban mining there. But probably more consequentially, the Chinese central bank, the PBOC, came out to say that their intermediaries in the financial system would no longer be able to process crypto transactions. So, that probably, that latter thing, that the announcement, was probably more serious for the long-term price impact, because China is obviously an important retail market.

And we've seen lots of moments in China, you know, going back several years, when people thought that maybe China would be sort of exiting the crypto race. But it seems a lot more serious this time with this pronouncement from the PBOC.

BRIAN SOZZI: Ben, Andreessen Horowitz out this morning saying, it's launching a new $2.2 billion crypto fund. Do you think that we'll see more of these types of announcements from various funds that are trying to capitalize on the pull back in Bitcoin?

BEN SCHILLER: Absolutely. I mean, Andreessen Horowitz is absolute Silicon Valley royalty. As you say, this is their third fund, and it's a big kind of endorsement of crypto generally, at a time when I think some other investors, other VCs are maybe pulling back a little bit because they're more responsive to the price. But I think with Andreessen Horowitz, they're able to ride out some of this volatility and look to the long-term.

So, I mean, they were early investors in Coinbase, for instance, and they took a huge dividend, huge payout from that when that company went to direct listing. So, I think they're kind of set for long-term. And that also sets a signal for other VCs in Silicon Valley and elsewhere to keep investing in this market.

And I think it's a good kind of indication that people are very kind of responsive to the price of Bitcoin, particularly in Ethereum. But there is kind of a wider kind of movement going on and really building up this-- this industry, and that's indicated by a company, like Andreessen Horowitz, really sending a signal for the future saying, we're still investing. We're still here. We're still going forward.

JULIE HYMAN: Well, and Ben, it's Julie here. Of course, we've been hearing from all of the sort of long time Bitcoin and crypto proponents. Folks like, Michael Novogratz, who say that they are holding firm. Is there any way, because of the nature, of course, of crypto, there's no way of knowing if they really are, right? If they're selling off some of their holdings. Are there any sort of tea leaves that you can look at to see who's been doing some of the recent selling?

BEN SCHILLER: Yeah, I mean, that's a great question. And I think generally in crypto, it's-- it's an interesting kind of balance of transparency and opacity, and in some ways, it's easier to find out what other traders are doing in the market, in some ways, it's-- it's maybe not so easy.

So, if you know who that person is on the chain, then it's possible to find out what they're doing. But if you don't, then you don't. So, yeah. I think people in the know know what Novogratz is doing, but other retail traders probably don't.

MYLES UDLAND: And Ben, I'm just curious, like, for the space in general. Kind of coming off of the Bitcoin conference. What? That was three weeks ago now. We've seen the price below record highs for some time.

You've been in the space-- we were just chatting before the break-- you've been in this space for five years, which means you saw the '17 cycle come and go. And I think a lot of people maybe haven't seen that cycle. Does it does it feel similar to you, at all? How do you-- how are you thinking about-- and Coinbase writes about this in their S1, right? The inevitable and expected cycles of price that folks in the space are always looking for.

BEN SCHILLER: Yeah, I mean, that's a great question. And you can go back even earlier to previous bubbles, previous kind of rise and falls. I mean, I have to say, this feels very, very different from last time. Last time was very frothy. It was very driven by retail investors who didn't really have the money to lose here.

This is much more about institutional investments. And it's much more about the whole ecosystem of crypto. It's not just about Bitcoin, not just about Ethereum, but about finding many more use cases across lots of different chains and lots of different products, whether that's NFTs, or some enterprise plays, et cetera, et cetera, that make this phenomenon, this market now, much more durable than it was previously.

You know, back in '17, people were talking about NFTs, and stable coins, and those sort of ideas, but they were very much just ideas that hadn't really come to fruition. Now, we're talking about real products, and real investments, and real use cases. So, I think it's much more here for the long-term than it was previously.

MYLES UDLAND: Yeah, we'll see-- we'll see how it plays out. But there's certainly something more constructive about D5 and ICOs if those are the poster children of how we're innovating in this space. All right, Ben Scheller, Managing Editor over at CoinDesk. Ben, really appreciate you taking time to hop on this morning, and I know we'll be in touch.