Bitcoin Market Implosion and Future Outlook

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It feels good to find what you're looking for. It feels good to Geico. Study and play! Come together on a window eleven PC And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need to study and play with select Windows eleven PCs. Eligible students get a year of Microsoft three hundred sixty five premium, and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at windows dot com slash student offer Law supppplies last ends june thirtieth turns at aka. mS slash college PC. evil then that building is helded So Welcome to Profperty Markets. I'm Ed Elson. It is june thirtieth. Let's check in on yesterday's market vitals The major indices climbed as tech stocks rallied, the Do close above fifty two thousand for the first time. Comcast jumped five percent after announcing it is spinning off NBC Universal and Sky from its cable business. Meanwhile, oil rose after the U. S. and Iran exchanged fire over the weekend President Trump said the two sides are now set to hold fresh talks today though Iran denied those claims. And finally, treasury yields were stable after the Supreme Court overruled Trump's attempts to fire Fed Governor Lisa Cook stillill in a separate decision The court expanded the president's authority to fire officials at other independent agencies What else is happening? OpenAI is reportedly delaying its IPO until twenty twenty seven The company confidentially filed to go public on june eighth and was on track to debut as soon as this fall, but according to the New York Times fallout from SpaceX's rocky IPO has pushed AI executives to hit the brakes Meanwhile, Rivalanthropic is racing ahead Kelsy now puts the odds that Anthropic goes public this year at seventy six percent. So to discuss what this delay actually means for open AI and for the AI markets in general. We're speaking with Alex Heath author of the Source's Nsletter and co host of the Access podcast, Alex Thank you for joining us. This is Huge news, unconfirmed officially. But this was reported by the New York Times open eye, the plan was they were going to go public. They filed confidentially. And now apparently they're scared of doing it this year You do a lot of reporting on open air. What do you actually know about this? What can we actually take away from this news? I think this was always very much in flux. It's been interesting to see How many versions of openp AI IPOing we can get in the press in the last couple of weeks. It's been kind of remarkable. I think there's a lot of investor banker types who are trying to gin this up I don't think open AI is ready I know that they're still trying to get there finance and invvestor relation org in place for what is needed for a public company. When you do the confidential filing You're as openAI said when it did that, you're really just setting yourself up with optionality to then be able to go out at a later date But you know, I remember reeddit That thing was in confidential filing for years because they thought they were going to go out and then they didn't. And I can't remember if it was the pandemic or something else, but it's very common for companies to do a confidential filing, which is just starting the process with the SEC and then delay multiple times, even years in some cases Doesn't it seem though that At least there are people within the company who definitely did want to. The person I'm thinking of was Sam And I remember we saw that reporting and who knows what's true at this point. But we saw this reporting where Sam Altman wanted to go public. He was trying to push that And then the CFO, Sarah Freyar said, No, I don't think we're ready. I don't think this is the time to do it. I mean I have to assume that there are people within the company who really wanted this to happen and now they're probably having to concede maybe this isn't the right time, specifically SA Yeah, I mean, the reporting is that Sam has been pushing for it, which I totally buy and that he wants a one trillion valuation, which I also totally buy. I do think there's probably others who are saying we're not ready Open AI andanthropic, these are not normal companies. They don't work like normal companies. They're incredibly chaotic They don't have formal processes in place that a mature public company would have. As commercial entities, they're really only a few years old. So even though they have these massive valuations, they very much feel and you feel this when you talk to people internally like a startup And that has a lot of u Things that have to be ironed out before you can IPO I do think anthropic will go out first. I have heard and others are reporting that they're eyeing October or November. I think they're a little farther along on building that muscle. They also have a bit of a simpler story to tell investors because of the kind of clarity of what they do is primarily an enterprise API business. Open AI just has a lot of wild cards, right? Ads are still rolling out. That story's not there yet. The hardware stuff they're going to be doing with Johnny Ive starting with the first device. I think they're going to announce in the fall. That's a giant wild card.. The super app strategy has not yet come into place. There's a lot of moving parts and there will always be with these AI labs, But I think anthropic actually just has a simpler story to tell right now, which is also why we'll probably go first. I think that's exactly right But part of my takeaway from this is It seems as though open AI on multiple different levels doesn't really have its shed together. And the confidential filing point, this happens. companies file, it takes a while But you also have to assume that I mean, someone within the company should have known, if we file, it's going to be reported on. and if we don't go public, that'll be reported on. And everyone's going to have a lot to say about all of this. The same is true of saying we're going to stop doing these side hustles, which was sort of their MO, and then they go out and continue to do these side hustles including going out and spending two hundred million dollars on a podcast. I mean, I feel like there are multiple different levels in which open Aye doesn't really know what it's doing Or at least that's the vibe I'm getting from all of these stop and start announcements. Am I being too critical or would that be a somewhat fair characterization of the company? I think they are a jittery company. I think this IPO thing is really being jenned up in the media by investors. I think the only concrete thing that's happened is they filed a confidential S one, they said they would do that. When they announced it, they said, we do not have a sense of timing. That is the only thing they have confirmed. and then there's a lot of anonymous reporting about, you know, they were thinking about the fall and now they're thinking about twenty twenty seven. We may get a new round next week saying they're thinking about the fall again based on whatever leaks outut ofanthropic. There's a lot of messages being sent through the press right now. I wouldn't necessarily take all of this as like super concrete. I think it is a very dynamic fast moving situation. Andthropics ARR could cr her for some reason in the next quarter. and then the story is not there. Open AI suuper app thing could not work and then it needs another year to regroup from that Ads cannot work, the hardware cannot work you know, they may need to redo the executive bench, right? There's a lot of things that they have to get through I do think they will IPO I would be shocked if it was in the second half of twenty twenty seven. I think it will be before that, whether that's Q three, Q four or Q one, Q two next year rememains to be seen, But we are going to get an IPO because you kind of have to. they've raised too much money. I mean, this is the natural end state. They could do another private round. They'll do an employee tender offer here soon. But you know I do think Sam in particular wants to do IPO and, you know, based on the success of SpaceX at least, you know, on the IPO day, they certainly have a path to that, I think Well, it's funny you mentioned that because one of the reasons that was cited in that article for why they're worried about going public was that they saw SpaceX as a failure. U to your point, massive pop on IPO day since then It's come crashing back down, but it's kind of around where it was when it started. U Do you think that that is genuinely a reason that they're worried about it when they look at SpaceX or I don't know, man. SpaceX you went into the numbers is SpaceX trading at one point Are two point one six trillion a good outcome or not for SpaceX? I mean uh based on their revenue I think it's pretty good. I also think's it's ultimately pretty good. I think ultimately it's not going to last. And I think that's going to be a problem, which was honestly why I was a little surprised to see that in the reporting that they saw SpaceX as a problem. It Scott calling Tesla being over not teach you anything Edge, you can't. This is Elon. come on. Look, I think I think SpaceX at two trillion and raising eighty billion or whatever on the IPO signals there is a market here I don't know if like, you know the third big AI IPO gets as much love as the second, right? I think that's why open AI and anthropic really want to go first, one of them. It will be a little tougher sell when you hit the third one. I mean, how much retail demand is there for these things And where will the world be in the fall with the midterms, everything going on in the world, right? So The fall gets kind of hazy and complicated in a lot of ways. I think Elon times SpaceX perfectly in the sense of this, you know, AI bubble fervor we're in in the markets. And its I think it's very unclear what happens. you know, the Fed may raise rates in the fall. There's a lot of things that could make the stock market a really dangerous place Do you think that Ultimately, this has implications for the AI trade at large. I mean, If the signal we're getting from open AI is there isn't enough demand out there, there isn't enough excitement or hype or we're not ready Um Do that mean that we're headed for some problems In the AI market at large? or is this more of an open eye specific issue? I think it's an open eye thing. I think these companies are just not ready and they're way more chaotic than they look even on the outside, even to people following them. They're startups still, they don't have all of the rigor in place that you need as a public company. Open eyes disclosures are a mess, right? with know Sam owns no equity. They're invested in all these things that they're doing deals with The governance is all over the place. I mean, it's just a very complicated company to try to like make sense of if you'res like the SEC. So I think they're probably just going to keep sending smoke signals out, you know of like, oh, we're going to do it h now. Oh, no, we're going to do it now. And like Anthropic will do the same thing U and we are in uncharted territory. I mean, I feel like that's always the case with AI and the AI trade, but it really feels that way now, doesn't it We should literally do a smoke signal from Sam Uutman's house, let it out like the pope when he finally decides that it's time. D here. That'll be the right story for investors. Okay. Alex Heath is the author of the Sourcecess Newsletter andcged of the Access podcast. Alex, always great chatting with you. Thank you so much. Always great. Thanks After the break coin enters a world of pain And for even more markets insights, you can subscribe to my weekly newsletter, simply put at simply putut. profgmedia. com Support for the show comes from OdDu. Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other? One for sales, another for inventory, a separate one for accounting? Before you know it, you are drowning in software instead of growing your business. This is where Odu comes in. Odu is the only business software you'll ever need It's an all in one, fully integrated platform that handles everything CRM, accounting, inventory, e commerce, HR and more No more app overload, no more juggling logins, justust one seamless system It makes work easier. And the best part, Odi replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business, whether you are just starting out or already scaling up. pllus it is easy to use, customizable, and designed to streamline every process. So you can focus on what really matters. Running your business. Thousands of businesses have made the switch, so why not you? Try Odoo for free at odoo d. com. That's odooot com Support for the show comes from LinkedIn ads. There's no worse feeling than making a major investment in something only to realize it didn't exactly live up to the hype, such as buying a nice piece of tech that ends up in storage collecting dust, or Taking a business workshop where your main takeaway was little more than a few motivational words If you work in marketing, this can happen with ads. 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Car Car Unfortunately, that lost feeling is what it's like trying to manage your policy with other insurers. Here, Car, come out, come out wherever you are. Please. With GIico, you can use the app to easily manage all your policies in one place. Did this parking lot have a waterfall? I think you've wandered too far, mate. It feels good to find what you're looking for. It feels good to Gaico We're back with prorofG markets. The price of Bitcoin is plummeting and as of now, the sell off is showing no signs of stopping. In just the past month, Bitcoin has fallen from around seventy three thousand dollars to sixty thousand dollars last week. It hit its lowest point since October of twenty twenty four before the election And despite the Trump administration's pro crypto agenda, investors today are nowhere to be found, all told, Bitcoin has erased more than eighteen months of gains and it's down over forty percent in the past year. So For more on this implosion in the crypto markets, we are speaking with Jemaima Kelly columnist at the Financial Times. Do mind, thank you so much for joining us Back in February, We were seeing a lot of weakness in the crypto markets. Bitcoin took a leg down to around seventy thousand ish And that seemed really bad at the time And you wrote this column basically saying that Bitcoin was in your view due for even more pain And that is indeed exactly what we're seeing. We're now down to sixty thousand. It's basically been cut and half. since its highs of around one hundred twenty thousand. let's just start with your reaction to what we're seeing here in the crypto markets I mean, yeah, as I wrote, I still felt that the Bitcoin was seventy thousand too high when it was seventy thousand. so I now think it's about sixty thousand too high. I think that fundamentally H There's nothing there because it's all just belief. and therefore eventually we willll get to zero. I've never been someone who wants to kind of you know, say when that's going to happen. but it definitely has felt to me the reason I wrote that column in February is because it has felt to me that this is kind of the kind of we're getting to the last bit of Bitcoin. And I'm not going to stick my neck out and say it's going to happen this year that we're going to zero. I don't think it will happen that soon The fact that we have this incredibly friendly crypto environment and it's still kind of doesn't seem to be finding any way of like any support does suggest that So we're heading down and down and down from here Your view is that sixty thousand dollars is sixty thousand dollars too high that actually the true value is zero which for many That would be an extremely striking statement. Why do you believe that this is that this is worth nothing. There is nothing that underpins Bitcoin other than belief. It is built on sheer belief and obviously stock markets and other markets are built to some extent on belief. and we're constantly thinking about a price of an asset is based on past performance and expectations for future performance, future growth, future returns And so obviously there's always a speculative element within any kind of asset price With Bitcoin, there is only speculation or crypto. people don't like Bitcoin to be lumped into crypto because that's their way of making Bitcoin scarce. That gets me to the next problem. There's no scarcity There is an unlimited number of cryptocurrencies. So You can't really have value without there being scarcity because otherwise Why would someone pay for something if there's an unlimited amount of it So the way that people try to make Bitcoins scarceite which it is because there'll only ever be twenty one million Bitcoins baked into the code in the beginning is by saying that Bitcoin is different from all the other cryptocurrencies Um, It is, inso far as it's got the first mover advantage. but apart from that, it really isn't and it maybe has a network effect and everything. But again, that's what we're saying there is Bitcoin's different because it has more belief It's more established, the belief in it is more established than the others. So again It's a If there's no scarcity And there's nothing fundamentally underpinning that price There's no bottom, there's no floor. So people say, Ohh, it's like gold and gold is speculative. Sure, gold is partly speculative People I'm wearing gold. We have gold in our iPhones. Gold is useful. People like to wear gold. It's a real thing. Bitcoin and cryptocurrencies just represent Digital strings of digits, that's all they are and they are people have assigned value to those strings of digits And once people, once people stop believing then it will go to nothing because that's all there is. There's nothing else under there I've been wondering at what point will people decide because I mean, I find Bitcoin to be a precarious asset as well. I've been wondering at what point will people decide, you know what We don't believe in this thing anymore Is this that moment? I don't think that that moment is going to happen all in one go. I think that moment is starting to happen And there will be a final kind of death spiral in which everyone quickly runs, tries to run for the exit. We don't seem to be completely there yet because Bitcoin isn't in complete free fall. cryptocurrencies aren't in complete free fall. There are a huge number of vested interests who will, I mean, that's the thing. That's why I consider it a headless ponzi scheme because it's kind kin to somewhere between a ponzi scheme pyramid scheme, multi level marketing scheme. because It relies on constantly recruiting new people and it requires also in crypto's case, it really requires a lot of people who kind of stay and Hold on, hodle, you know, hold on for day life. You know, don't sell. And you really need people to not sell in order for the death fal to occur. You've now got Michael Saylor, who's like the big dog bit of Bitcoin, I don't know what to call him, but he is the kind of biggest holder of Bitcoin in the world. He you know, turned his company into a Bitcoin holding company. He's now saying he's going to sell over a billion dollars worth of Bitcoin So It's not, I don't think it's like necessarily now I think that what we're seeing is Each time crypto has had a big run up, there's been a narrative, there's been a story for why it's going up. and there has, there's been a reason, right? So you had in twenty seventeen, you had ICO manania. So you had these initial coin offerings, ICO's that basically people were just like making money out of thin air, Eone was getting rich and people were just like coming up with these ridiculous tokens and running off with the money. and because people had to buy Ethereum, Eher, the cryptocurrency native to to the Ethereum network That was going up massively in value and all the other cryptocurrencies were going up with it. So there was that reason for the kind of big boom in twenty seventeen then you had A later boom was fueled by the NFTs non fungible tokens. So if you remember that and the metaverse and web three and people were suddenly convinced that oh my gosh, like this is the future of the internet. I think that was the dumbest era of markets in my lifetime yeah. Well NFTs and ICOs, to be honest, it's really hard to know to fine line ICOs arguably worse than NFTs, but yeah, they're both pretty bad The most recent run up in prices was a bet on Donald Trump basically being this like crypto president, despite the fact that obviously a few years ago when he was president the first time aroundound, he said that he doesn't believe in Bitcoin crypto creds. Suddenly, it seems like he had some meetings with some kind of big crypto executives who might have been willing to maybe buy his cryptocoin and maybe give him some money. Suddenly, he was going to be the like Bitcoin president. make America the crypto capital of the world In that Context we've seen crypto actually doing badly. And so it's kind of like that was like When you keep seeing these narratives unraveling There starts to be like a loss of faith because it's like, well, hang on, this was meant to be the time. you know, peopleople are putting Bitcoin into their ETF's into their four hundred one Ks All of these executives have been like, you know, pardoned and released from prison because like Donald Trump was In that setting, in that like extremely permissive setting, If crypto is still thriving and actually doing worse than it was before Trump came in That seems like a kind of problem because what's the next story? like and have we kind of run out of stories? And I think perhaps we have run out of stories because people are becoming a bit little bit disillusioned. Because each time there's a new story, it turns out that it kind of turns to nothing and then crypto crashes again U So yeah, I think I think we've kind of run out of stories for crypto And I think that's an issue Jemari Kelly is columnist at the Financial Times. Jemara, thank you so much for your time. Thanks for having me If you are worried we're in a bubble, I have some news for you that probably won't help. A new article by Baoian Wang, a finance professor at the University of Florida reveals that first quarter earnings this year were artificially inflated by roughly twelve percent. How is that possible Well, it's all because of a strange accounting standard known as ASU twenty sixteen zero one. Under this rule Companies are asked to measure the value of their own private venture investments and then report those returns or losses on those investments in the other income section of their income statement. Now historically, those numbers have been rounding errors. Companies usually don't make huge venture bets that distort the company's earnings In the age of AI, that is no longer true. Q one of twenty twenty six Alphabet, Amazon, and Nvidia reported a combined sixty nine billion dollars profit not from selling chips or selling ads or selling cloud services, but from gaining huge returns on their AI investments, specifically in their investments in companies like Anthropic and also Open AI In other words the fact that these AI gains are still unrealized gains They are nonetheless being realized in the earnings of some of the largest companies in the world. And it is against those same earnings that investors are now pricing this market and then looking at those price to earnings multiples and then ultimately determining whether or not we are indeed in a bubble, which basically means that our main bubble indicator is now also in a bubble So the question then becomes How pervasive is this really? And the answer is Professor Wang estimates that private market valuations accounted for roughly twelve cents of every dollar of profit in the S and P five hundred in Q one of this year. and without those markups on those AI companies