caroline: from bloomberg's world headquarters in new york, in caroline hyde. sonali: i am sonali basak. romaine: and i am romaine bostick. coinbase reporting second-quarter earnings with trade volume growing 38% on a sequential basis, this even as bitcoin dropped from that all-time high. institutional trading volume picking up the slack. and as coinbase and its industry

matures, so does crypto. lobbyists keep tax reporting rules out of infrastructure bill, there push failed. -- their push failed. remember last week when we had a founder on, we had this great conversation but we had some technical difficulties. he will come back today and we will talk to him. hopefully everything will stay centralized as we talk about the decentralized world of currency. sonali: let's talk about coinbase because shares are pretty much flat wavering after revenue beat estimates trading volume beat estimates. ethereum volumes started surging. they are short on guidance, though. joining us is mark palmer, managing director and fintech analyst at btig. he has a $500 price target on

coinbase with a buy rating. bring us your spreadsheet. what is underpinning that price, and did you like what you saw today? mark: thanks so much for having me. it is difficult to argue with a quarter in which the company beat from the top to the bottom line, put out extraordinarily strong metrics. it is a quarter during which we saw volatility, especially around the third week of may when crypto crashed. and so, the reality is that volatility is a good thing for exchanges like coinbase, whether prices are going up or down. but after that occurs, there can be some disenchantment among investors. that disenchantment was seen in the first few weeks of july when

we did see exchange volumes declined. what i think is going on here is that the market was aware of the fact that coinbase's second-quarter volumes were going to be very strong, and even though they were stronger-than-expected, investors are looking right through this report and into the balance of the year. romaine: i am curious about the customer makeup. we saw based on the company's reporting that institutional trading volume jumped 48%, a faster pace than retail traders, which was 21%. the company touted 1000 institutional customers in the most recent quarter. as this company evolves, to you think it's future lies more with the institutional side or is retail going to be its bread-and-butter? mark: we believe the evolution of coinbase is about establishing more balance. where right now, the focus is

very much on retail and on generating transaction revenue. over time, we expect that as the company bills out is institutional brokerage platform and begins to build out around areas like lending and staking, which could be a real shift especially in 2022, as ethereum 2.0 is expected to make its merge and probably create some extraordinary sticking volumes, then -- staking volumes, we will see that as institutional numbers to to balance out the retail numbers and we will not see the same volatility, or the same sort of correlation between the price of coinbase shares and the price of bitcoin. sonali: talk about competition, because the fact that robinhood's customers are asking so aggressively to compete with coinbase, does that create

retail business -- does that create -- for its retail business today? mark: coinbase has advantages relative to other players in the market, one of which is frankly that it is perceived to be the safe haven for both retail and institutional investors. . you can go onto coinbase, which has never been hacked, and feel comfortable that you are going to have your capital preserved, the trades are going to be executed as they should be. with that said, we do believe it is essential for coinbase to continue to build out both its retail and institutional sites, to be able to play off that advantage as a safe haven. that means continuing to add more and more alt coins, continue to add services especially to consumers, that is

something coinbase that just started to do, but with extremely low interest rates, there is definitely a lot of appetite for yield. we did note that during the quarter, for the first time, trading volumes on ether, the coin associated with ethereum, exceeded those of bitcoin, which is a pretty significant development that speaks to the fact that coinbase is feeding off the growth in the centralized financial defi as well as non-fungible tokens, nfts. romaine:. romaine: i am curious about the potential for consolidation in this industry may be not necessarily consolidation but if there is growth may be the growth comes through acquisition. puddings those tentacles out there -- putting those tentacles out there and bringing other companies in. mark: coinbase assembled its platform in large part via over 20 acquisitions.

the question is what would -- coinbase's platform? one area that would be interesting is asset management. coinbase has been looking around in this area. we think it would be extremely good fit for them to be able to offer etfs and other products. of course, bitcoin etfs, crypto etfs are not yet legally in the u.s., but we do believe that by creating that framework, coinbase will be positioned to be a leader in that space when they are finally approved, which we believe could be in 2022. sonali: i asked you about robinhood competition but this goes the other way as well. we have some other competitors, particularly binance. we saw the u.s.c. will step down late friday in a surprise move -- the u.s. ceo step down in a

surprise move, the retail investors not care? mark: i think coinbase certainly would like to see some sort of a shakeout on the regulatory standpoint. coinbase has positioned itself as strict adherence to regulatory guidance. it has played it straight since its founding. if there were to be a shakeout, if you were to see some of the other players in the space come under pressure as the regulators crack down, frankly, coinbase stands to be a significant beneficiary of that. caroline: mark palmer, we thank you. coming up, we dig more into crypto, as investors are turning more to de-fi platforms. we speak to the cofounder of a company that has grown as a

result of its own stable coin. that is next. this is bloomberg. ♪ g. ♪

romaine: we talk about decentralized finance, it revolves around applications to perform -- that perform financial functions of the ledger like lending funds. there are more than 200 of these de-fi apps, but makerdao has thousands of coins in circulation. last week we had the founder on but we had some technical difficulties.

conspiracy theories prompted joe weisenthal to quit the show. we are pleased to welcome the founder back, rune christensen. and we could not have this conversation without the triumphant return of joe weisenthal. take it back over. joe: i want to see which one of us will pull the plug this time. we talk a lot about stablecoin's, tether and others. yours is different. it is decentralized. why is that important? explain the mechanical difference and what it is important for decentralized stablecoins to exists. >> the financial infrastructure of the future should not be controlled by a single person or a single group picking decisions behind closed doors. we think creating financial infrastructure that is controlled openly with decision-making processes that enable stakeholders of all kinds

is just going to be a better and more equitable infrastructure for the future of finance. joe: so your stablecoin dye is backed by crypto assets as opposed to one dollar for one dollar in a bank somewhere. what are some of the -- one of the biggest assets people pledged as collateral is decentralized stablecoin. are you back-door centralized? rune: it is definitely not ideal that right now most of the collateral is in the single assets, because basically the idea behind that, a decentralized stablecoin, is you want to diversify its collateral use. but they could think about having usdc and having dollars backing it is its usage. what maker is now focused on is

deploying its collateral and deploying capital to real assets. one of my favorite examples is actually a small business, which is an american real estate short-term mortgage lender that has set up the world's first decentralized line of credit. basically, it has established a relationship where you have decentralized protocol, makerdao, providing cheap credit to small businesses in the u.s. and then it learns that out to entrepreneurs and businesses in america. that is an example of how de-fi can cut through financial barriers and establish direct relationships that give better terms to regular people. caroline: and add to growth in the u.s.. that is the argument being put in particular on capitol hill right now, the force with which cryptocurrency came to bear, some of the technology that was deployed to be able to call your

senator with ease when certainly it was realized that the language in the infrastructure bill, and is still in the infrastructure bill going to the house would remain. the whole premise is upon decentralization. how much of a worry is the senate infrastructure bill right now for you? rune: everything that happened with the infrastructure bill, you don't like to focus on the past, because i think it is amusing to see the level of political momentum and understanding of the senate floor of the advantages that de-fi is over degrading today. when it comes to the u.s. economy of de-fi, it is disproportionately benefiting the united states. stablecoin are basically the lifeblood of de-fi. all of them are u.s. dollar based. nobody else is getting this

advantage and this is resulting in -- actually, i just calculated, today already, it is more than $100 billion of capital that has been deployed in the u.s. economy in the form of corporate bonds and treasury bills, providing investment, creating jobs. i mean, it is establishing the u.s. dollar as the internet reserve currency. romaine: but some of the criticism, the pushback to that would be that the u.s. government wants to establish the dollar as the -- currency. are you worried that the fed or the treasury might come in and usurp some of the gains you have made? rune: india, i believe that -- in the end, i believe that given the conversation we are having, the advantage that de-fi is creating for the u.s. economy, i really believe that we will see a positive outcome that is going

to regulate the space sensibly and promote innovation. the reality is that while america is right now benefiting far more than basically any other country in the world, this is global technology. this is technology. if the politicians want to create a hostile environment for crypto in the u.s., he will simply see all of these benefits slip away to another country. i think that could happen. joe: here system has two tokens, there is the stablecoin die that maintains its head to the dollar, and then there is the maker token. the holders of the maker token have done extremely well. there is a stability fee that burdens tokens so the supply drops. sounds like a buyback. gary gensler, for example, has been talking about some of these tokens in de-fi, may be they are equity and should he treated as

such. does this concern you. do you believe the maker token is a de facto form of equity? rune: i think the thing that really sets de-fi apart is the fact that there is no single person, no company in charge. what the maker token allows people to do is directly participate in governance of the system. holders of the token directly vote. questions like what collateral should we include? what kind of parameters and terms should we give it? they are looking at projects like the one i described earlier, talking about lending money to real estate in the u.s.. there's also other projects like dollar x, a solar farm in long island. it is this transparency and this community governance that allows

people from all over the world to actually sit and directly make these decisions. there is not some ceo or boss or middleman that makes the decisions for them, they have to do it themselves. caroline: you are worried about a boss being formed. you speak so optimistically about what has been created in the united states already, and how it could be driven offshore if regulation is not done well. you want to focus on the positives. you want to talk about the positives injected by de-fi into the united states. . is there a risk that the u.s. loses that? rune: well, like i said i am still optimistic on the political momentum. it is just the simple fact that there is theoretically risk that this gets driven offshore in the u.s., and it would be irreversible. the u.s. would lose this massive amount of capital and innovation

. the united kingdom, switzerland, singapore, surely, there will be someplace where there are politicians and lawmakers that want to create an environment that welcomes crypto innovation. based on what i heard in the senate, i think probably it is the u.s. that is going to make a good decision. romaine: great stuff. we appreciate you coming back, cofounder of makerdao. he was just talking about the idea that more people accepting crypto in their space, well, guess what, joe, amc will now allow moviegoers to pay for their tickets and snacks in bitcoin by the end of the year. joe, are you on board? [laughs] joel: how many bitcoiners are good to think, i am going to spend my bitcoin on popcorn?

it is a great headline for first release but i i'm not convinced. but i have gotten a lot of things wrong this year, though. [laughter] sonali: but can you buy amc stock in bitcoin? joe: that would be amazing to see. caroline: it is amazing how many investors are leaning into this. amc shares have done pretty well whether or not you will be buying your popcorn with crypto is not the matter. we will discuss why crypto lobbyists were called ill-equipped in the bill. that is next. ♪

caroline: we have been talking

all things crypto. one area the industry keeps hitting hurdles in is washington. romaine: i think a lot of the crypto faithful got a taste of that. great story today that quoted the blockchain association executive director, who basically talked about how they have known for our that they are under resourced and understaffed. how the budget of the advocacy group is only 1% of what the bankers association spends. the crypto industry has woken up to the fact that they need to invest in washington. let's get to jodi schneider, bloomberg political news director. you know washington better than anybody here. if you if you want regulations written in your favor, you have to be present. they certainly were not present. jodi: they are getting kudos for their public outreach, but you have to have an extensive and expensive lobbying organization in washington especially when

dealing with regulation and with the u.s. senate. as we saw, they thought they had this amendment, they had bipartisan support on it. we had the democratic side, mark warner. it looked like this thing was adopted and then at the last minute, richard shelby decides he doesn't want to give unanimous consent for the legislation to move forward because he doesn't think there is enough military spending in there. . that is what ends up happening. sonali:. sonali: a lot of whiplash here. what can happen next to get concessions made for crypto? jodi: they do have a few avenues. it is not all done quite yet. the house has to pass this legislation. the senate goes home, the house will come back in september and may make changes. however, the senate would then have to adopt those changes because you need the language. interesting is the irs. they will essentially implement rules that will basically

interpret the law and that takes a long time. but it was a good shot, but they did not quite make it through this time. caroline: jodi schneider, bloomberg political news director. don't miss the program tomorrow focused on u.s. cpi data and inflation, of course.

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