Bitcoin sheds 10% in a week as investors continue flight from risk assets: CNBC Crypto World

Key Concepts

• Bitcoin Selloff: Recent decline in Bitcoin's price, reaching as low as $80,000.
• Deleveraging: Natural process of reducing debt or financial risk in the market.
• Digital Credit Issuance: Strategy's business model of creating and selling credit backed by Bitcoin.
• Treasury Credit (STRC) & European Credit Instrument (STRE): Examples of credit instruments issued by Strategy.
• Debanking: The act of traditional financial institutions closing accounts, which Eric Trump claims happened to his family.
• Financial Freedom: The ability to move money freely and without restrictions, a concept Eric Trump associates with cryptocurrency.
• Tokenization: The process of representing ownership of an asset on a blockchain.
• World Liberty Financial (WLF): A stablecoin project co-founded by Eric Trump.
• Stablecoins: Cryptocurrencies pegged to a stable asset, like a fiat currency.
• Conflicts of Interest: Concerns raised by Democratic lawmakers regarding potential conflicts of interest between the Trump family's crypto ventures and political positions.
• Binance Founder CZ (Shing Ping Xiao): Mentioned in relation to a pardon and a deal involving a Trump family-tied stablecoin.
• Tokenized Hotel Development Project: The Trump Organization's initiative to tokenize a hotel development.
• Decentralized Finance (DeFi): Financial services built on blockchain technology, aiming to remove intermediaries.
• American Bitcoin: A Bitcoin mining company co-founded by Eric Trump.

Current Market Conditions and Michael Saylor's Perspective

The crypto market is experiencing selling pressure, with Bitcoin dropping to as low as $80,000. Ether fell to $2755, and XRP dropped below $2. Over the past seven days, Bitcoin has declined by 10.3%, Ether by 12.3%, and XRP by nearly 14%.

Michael Saylor, founder and executive chairman of Strategy, discussed the recent selloff at the Clear Street disruptive technology conference. He attributes the decline to a "natural deleveraging of the asset," noting that such drawdowns occur every six months to a year and that the market was "overdue for one." Saylor has experienced five major drawdowns since 2020.

Strategy recently announced a purchase of over $835 million in Bitcoin, bringing their total holdings to 649,870 Bitcoin as of November 16th. Saylor explained Strategy's approach to Bitcoin purchases: their business involves issuing digital credit backed by Bitcoin. They sell credit instruments like treasury credit (STRC) and European credit (STRE), which pay dividends (potentially 10% of par). The capital generated from selling these credit instruments is then used to buy Bitcoin. Therefore, Strategy's Bitcoin acquisitions are "driven by the credit markets."

Eric Trump on Crypto and Debanking

Eric Trump, co-founder of American Bitcoin and executive vice president of the Trump Organization, shared his perspective on his family's involvement in cryptocurrency during an interview at the same conference. He stated that his family entered the crypto space because they were "debanked by traditional financial institutions." He views Bitcoin and crypto as an "avenue to financial freedom."

Trump recounted instances where major financial institutions like Capital One, JP Morgan Chase, and Bank of America closed numerous corporate accounts belonging to the Trump Organization, citing reasons such as his father wearing a "Make America Great Again" hat. These accounts were for golf courses, condominium associations, hotels, and restaurants, impacting hundreds of employees. He described this as an attempt to "debank us," "deplatform us," and "hurt us."

He contrasted this with the perceived inefficiencies of traditional banking, such as the inability to send wire transfers after 5:00 PM on a Friday, allowing banks to hold funds and earn interest. Trump argued that cryptocurrency offers the ability to "move unlimited amounts of money for virtually zero fees, no middleman" at any time, which he defines as financial freedom. He also criticized the lengthy "know your customer" processes required by banks, which can take up to 120 days, calling it outdated and not technologically advanced.

Trump believes banks have historically held a monopoly on the financial system but are now embracing cryptocurrency due to its significant growth, citing the success of platforms like Coinbase and Robinhood, and the trillions invested in Bitcoin. He reiterated that his family's entry into crypto was out of necessity due to being shut out by traditional banks.

Addressing Criticism and Conflicts of Interest

Democratic lawmakers have criticized the Trump family's crypto ventures, particularly concerning potential conflicts of interest. A letter from Senators Elizabeth Warren and Jack Reid to the DOJ and Treasury Department pushed for a probe into World Liberty Financial (WLF) for allegedly selling tokens to businesses with ties to North Korea and Russia.

Eric Trump vehemently denied these allegations, stating, "There are no conflicts of interest." He asserted that his father "has absolutely nothing to do with cryptocurrency" and "zero involvement with our company." He described WLF as the "fastest growing stable coin on Earth" and believes stablecoins can "save the US dollar" by bringing trillions back to the U.S.

Regarding the pardon of Binance founder Shing Ping Xiao, Trump stated he has met CZ only twice and has no contact information for him. He acknowledged that Binance is the largest exchange and that most people in crypto will transact through it. Trump believes CZ "got a raw deal" and that the Biden administration was "going after absolutely everybody in the industry," leading to America losing its competitive edge in crypto to countries like China, Korea, and the Middle East. He contrasted this with his father's embrace of the technology.

Trump also addressed the claims of selling tokens to entities with connections to enemies of the United States, calling the accusations "laughable." He stated that WLF has "know your customer" protocols for every token buyer. He dismissed Senator Elizabeth Warren's criticisms, referencing past accusations of collusion with Russia and her Native American heritage claims, stating he puts "zero stock into what Elizabeth Warren says."

He emphasized that WLF was started when his father was facing legal challenges, and they have "won every single one of those cases." He believes his father has always believed in cryptocurrency due to his belief in technological advancement, comparing it to advancements in AI, power generation, and military might.

Tokenization and the Future of Finance

Eric Trump discussed the Trump Organization's recent announcement of the world's first tokenized hotel development project. He explained that the reasoning behind this move is to give investors access to high-growth real estate investments from the outset, rather than tokenizing a completed asset.

He envisions a future where "pretty much every asset class is tokenized in some way, shape, or form." He used the example of Taylor Swift's music, suggesting artists could allow fans to invest in their projects through tokenization, receiving cash flow. He believes tokenization will extend to the arts, music, Hollywood, real estate, commodities, and the oil and gas industry.

Trump highlighted two specific projects: a hotel in Dubai and a hospitality project in the Maldives. He questioned why individuals who believe in a brand or project should not have the ability to invest, rather than solely relying on traditional lenders like Deutsch Bank or JP Morgan Chase. Tokenization, he argued, will "massively broaden the market" and "massively broaden the opportunities to finance," allowing investors who previously lacked access to participate. He used the analogy of fractional ownership of the Mona Lisa as an example of how tokenization can democratize investment in art.

He believes that much of this can be done in Decentralized Finance (DeFi) using smart contracts, eliminating the need for middlemen, fees, and expenses associated with traditional banks. He sees this as a "very powerful industry" that is rapidly approaching.

Regarding the Trump Organization's future involvement in tokenization, Trump, a self-proclaimed "hard asset guy," sees a "natural bridge" between real estate and cryptocurrency. He criticized the traditional real estate market for its numerous middlemen, such as brokers who charge high commissions, and title companies that impose significant fees. He believes blockchain technology and DeFi can offer more efficient and transparent solutions for transactions like title conveyance.

Outlook for Bitcoin Mining and Price

Eric Trump also touched upon American Bitcoin, a Bitcoin mining company he co-founded, and offered his outlook for Bitcoin's price. The full interview is available on cnbc.com/cryptoworld.