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>> bitcoin butchery. cryptocurrencies struggle to regain ground after losses not seen in years. what prompted the selloff, and is the crisis a game changer? this is inside story. ♪ hello and welcome to the show, i'm sami zaydan, well the crypto gold rush is going through another dip but this time it's gone so low some are warning it may not stop. many digital currencies have seen their values reach zero. that's knocked a lot of confidence out of the market , creating a domino effect reaching all the way to the top

. the mother of them all, bitcoin, is in trouble. two major trading platforms have dropped it one cited technical problems and the other so-called crypto winter meaning the current extreme market conditions. as investors become increasingly nervous more have been selling off. >> pretty scary in the bitcoin space but not something we have not seen before. it was down 94% back in 2011 and then came back from the dead and then was down again and then went up and then down 85% to around 3150 in december of 2018. >> you have to be 70% lucky and 30% knowledgeable to win the market. if you are in the right place at the right time, there is no way you cannot win. there is no state or

organization that gives you this kind of profit. you just have to be lucky. >> the more people sell, the less it is worth and people have been selling big-time. in november the crypto coin reached a record high value of nearly 70,000 u.s. dollars but in the following months, went down, reaching $35,000 in january. in may it fell below that and by june they have lost another $10,000, dropping below the benchmark value of $20,000. let's bring our guests into the show. we have joining us from nairobi alican satu, an investor and ceo at rich management. in london naim aslam is chief market analyst at avatrade, and in dublin brian lucy professor of international finance and

commodities at trinity business school. welcome. let me start with professor brian. what prompted the selloff in the first place? brian: bitcoin and other crypto's has been suffering for weakness since the end of last year if not before. what has knocked it and the rest of them has been the fact that as the global economic and geopolitical environment has become more uncertain, we've got supply chain issues not just from the russian invasion of ukraine but also from chinese policies around covid, we have a problem with regards to the likelihood of quantitative tightening, unwinding the wall of money that was poured into the global economy with the

consequent inflation issues coming from both that and from the war, all of these have made the global risk environment much more risky. and what we've seen is that the real reason why many of these crypto assets showed such an increase was a desire for yield . at the top of your show you were saying there would be a 100 times return. but you only get massive returns in exchange for massive risk and the appetite for risk has decreased as things have gotten more uncertain. investors have been moving back to more safe havens. >> let me jump in. i thought the whole mantra we are told about cryptocurrencies is that people put money in them to try to protect themselves

from inflation and uncertainty. if you look at the countries with the top investments in bitcoin, they were that companies with big inflationary problems. how did it go from being a driver toward to a detractor from cryptocurrency? >> because trying to sell an asset is hyper risky. every study that has been done has shows there is incredibly limited usage of it as a currency. as an asset, they are very risky. they have interesting characteristics. they are very volatile.

if you're in the right place at the right time that can give you a great return. but they are not for everybody. they are a hard currency structure in that many of them have a limited number of tokens or satoshis or you know whatever you can create that can only ever be created and as a result there is an inbuilt bias towards appreciation of the nominal value. that's not the same to say that they're a hedge against inflation. >> that's interesting. in some countries like turkey and russia, we are told the reason that people were putting in their money was because they were afraid of losing value in their local currencies. let's bring in naim, was also

the collapse of some of the other coins like terra usd did it contribute to what we've seen happening in the wider digital coin market? >> i concur with you. when you are in a new cycle of innovation technologies blow out like these that do happen as a market adjust a new reality a new product and as you guys were discussing earlier you know search for a better yield product obviously created an enormous amount of a grid in this space. it created a massive bubble around everything. so basically just like how our traditional systems financial systems work where one bank is pretty much using the money from another bank and then you have that domino effect already taking place in the crypto world because a lot of these yield players they come from traditional markets now. they are using the same sort of mentality. so once that pool begins to flow

between the institution of course there's a massive risk of domino effect. one project falls and others come on the back of it. we have seen that in the case of celsius. even now blockify, which was another yield based project, being rescued by ftx, another american exchange so the story really goes on. going back to what you are discussing earlier, i just want to add that i'm not saying that bitcoin is still not an hedge i'm against uncertainty, i'm not saying that bitcoin is not hedge against inflation, but what i do think that it is plausible to ask this particular question is the reputation has massively been impacted. because as brian mentioned

earlier, you know we are living in -- inflation is at a four decade high. we should we should see bitcoin prices completely you know like literally soaring on the back of the. we've seen the evidence of gold prices at least showing stability when dollar index is already at its multi-year high . so we see that usually when the federal reserve tightens the monetary policy, we see you know gold prices moving to the downside. but gold prices are very much stable because of inflation and in terms of a bitcoin, we should we should have seen a lot more buying happening. the same argument goes for the uncertainty in the market as well. with the risk of climate, the markets falling, you know now that correlation between bitcoin which is a relationship either

moving positive or negative , between bitcoin and the stock market is very much positive . that means that bitcoin is very much acting as a riskier asset or as a risk on asset. we do not see bitcoin moving to the upside when stock markets are moving in the other direction. >> so ali i guess what we're saying so far here is that there was bitcoin or digital currencies, crypto currencies were simply a mechanism for wild gains, a lot of risk, and when it wasn't delivering that kind of gain anymore the bubble was too big and it just had to burst at some point. >> i could not agree more. it reminds me of that quote by hunter s thompson. "life should not be a journey to the grave with the intention of arriving safely in a pretty and

well preserved body, but rather skidding broadside in a cloud of smoke thoroughly used up totally worn out and loudly proclaiming , wow, what a ride." we have had the right now. the ride is over. bitcoin and cryptocurrencies were more of what were not the antidote to central bank bubbles , they were a symptom of it. in the last three years, the era of free money the era of you know the trampoline the idea that you could generate those returns that were described at the beginning of your show, the fear of missing out all were , conducive for this extraordinary bubble that we saw develop and unfortunately the bubble is deflated. i think we've still got considerable downside. it is no longer investible by any institution. we had that that that period

when the likes of elon were piling into it and then promoting all kinds of other coins like doji coin but in any institution now reporting bitcoin or even a crypto currency on its balance sheet is going to find its cfo shown the door in the blink of an eye. so i think what we are seeing is the end of an era. it was exciting. some people made a ton of money, more people have lost it, but essentially this this gig is over. >> those are big words. i can see naim shaking his head in disagreement. is the party over? >> i am a big holder and i hold

bitcoin in my wallet. >> even though a lot of this was driven by pure speculation and greed and the era of easy money, people borrowing money to buy digital currency is over now. >> with money around the system, you're going to have a situation where it's going to fly into all sorts of areas where you can get a return, particularly when you've got relatively low inflation as we've had over the last seven years. it is not just bitcoin or an fts. there's been a whole host of other assets where there have been rocket price appreciation . >> but one of the one of the assets which are deflating because there's not enough money

flying around now? >> it's the first one that really deflated was dnft because the idea that you know a picture of a monkey and a hat would have inherent value other than being a picture of a monkey in a house was always completely bonkers these crypto assets have some i kind of disagree with madame lagarde i think what these are valueless but not worthless they have a worth to people who believe in the need for a parallel decentralized monetary exchange system and who are happy to accept the incredibly high volatility. does that mean they are worth 70,000 euro? there is probably a floor above zero but i think it is is a long way away from $17,000 -- $70,000. so i think the era has gone out in the sense of the wild days. these were never going to be a

currency. then they were ever going to be an asset. if you are going to have an asset, and it becomes big enough, deregulate it. you're seeing increasing regulation and discussion of regulation and the increasing maturity of these markets with things like etfs and options and futures. once that happened they became inextricably linked to the remainder of the financial system, which they hadn't been before and therefore became as was said a risk-on asset. >> all right. naim, you are presenting the opposite perspective and i interrupted you so let me give you the chance to complete the thought about why the party is still on for you.

>> if you are talking about you know excessive money printing money, qe, whatever you want to call it, deflated entire space look at look at nasdaq look at smp look at dow john everything is pretty much crushing but not to the extent but if you look at the individual stocks the meme stocks and everything else they were obviously and clearly they were very much pumped because of excessive money from the retail side of the institution. bitcoin is a different beast. it has a history of coming back very rapidly back to his all-time highs. my only concern in relation to this particular one is that i wanted to see that credibility coming back a little bit, meaning bitcoin needs to establish itself as a hedge against uncertainty and inflation. having said that, there are odds we may see it move further to

the downside and that is where i see the floor. >> you do not think it will head to zero? >> no. we have had many of those calls. it's all about filtering through the noise and looking through that to what the future is for this one. >> allie, do you agree? have we approached the floor? >> i think we will see short covering rallies because when something falls like this you will always get these balances but i think what we have seen now as a turning point. it was exponential to the upside and now it is exponential to the downside.

you can make the argument that it would go down to 1000. it might not go to zero, but it is going a lot lower. it is a feedback loop. at a macro level, it's a symptom of central bank bubbles. it's not an antidote to them. now we are exiting the era of central bank bubbles. it's impossible for western governments to run their economies by just printing endless amounts of money. this is why we've got inflation lifting off. annette tells us the world understands that the hedge against inflation is hard or soft assets like food, oil, wheat, things you cannot print. those are the true hedges and i think this was a wonderful

delirious episode that lasted for a long time but ultimately i go back to the south sea prospectus where it was said this is carrying on of undertaking of great advantage but nobody knows what it is. and frankly, no one does. >> can i make a request? >> briefly. go ahead. >> can i make a request and have the three of us back here toward the end of this year? >> someone will be right and someone will be wrong. pride -- brian, the fact that we

are seeing institutional investors dumping their digital coins and that crypto exchanges are announcing layoffs, is it a sign that things will not go back to where they were anytime soon? >> i think we are moving into a different environment. until we move through the inflationary era that is partially driven by money and partially by supply shocks, until we move to where yields are pushed down nontraditional things like government stocks and commodities like wheat, the boring stuff, then we will want hyper risky assets again. and that is where the remaining

crypto assets will come back and have their day in the sun again, along with something else. but they are not cryptocurrencies. they are just assets. they have never been and never will be a substitute for fiat currency. the only substitute for fiat currency will be central bank digital currencies. >> whatever we call them, is this a turning point in at least regulation that going forward they will need to be regulated in a different way? >> that's an excellent question. the answer is look at the crypto landscape today. do we have more regulations compared to three years ago or when the last crash happened? the answer is yes. with many exchanges that are

regulated in the u.s.. so i think the current blowout in the high-yield space will only invite more regulators to come and provide securely. -- security. >> who will provide that regulation and what will it mean -- and will it mean for what was supposed to be a free flowing decentralized currency? >> as a human being you want to be governed by one single entity.

and we do not have that currently in the crypto space. but now we do see some initial actions by companies like celsius where they say [indiscernible] >> that is desperation. because the whole point of having decentralized peer-to-peer finance is that it is not regulated, that the market finds its own regulation . stopping people from transacting on unregulated markets is not regulation, it's people trying to prop up liquidity positions for you know for perfectly sensible and sane reasons. the reality is moreover this goes it'll be regulated by the

sec, it'll be regulated by the fsa, it can be regulated by the ecb. >> we are out of time and i know we have plenty of different perspectives on this and perhaps we'll come back and talk about this all again when the coin has gone up or down. thank you for a great discussion. and thank you for watching. you can see the show again anytime by visiting our website aljazeera.com for further discussion, head over to our facebook page. you can also join the conversation on twitter. from me and the team here in doha for now, goodbye.

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