Trump’s impact on crypto & your portfolio

Note: Transcripts are automatically generated from episode audio, and are not fully corrected for spelling, grammar, and formatting.

Laura Shin: The Biden administration was so anti-crypto, I was like, oh my God, it’s just like watching Blockbuster and Netflix is coming, and Blockbuster is not changing and doesn’t know what to do, and in fact thinks that they’re invincible. This is like literally watching the U.S. deal with crypto, and it’s very nerve-wracking as an American.

Bob Safian: That’s Laura Shin, crypto expert, journalist, and host of the podcast “Unchained.” With the crypto industry booming under the Trump administration and Trump and his family engaged in their own personal crypto ventures, I wanted to talk with Laura about the emerging economic, political, and geopolitical implications.

Laura takes us through the twists and turns in layman’s language, along the way providing a primer on how crypto really works, why stablecoin use is growing so fast, and what Coinbase joining the S&P 500 means for your portfolio. Plus, her advice on how each of us should be experimenting with crypto right now. I’m Bob Safian and this is Rapid Response.

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I’m Bob Safian. I’m here with Laura Shin, journalist and host of the podcast “Unchained” covering all things cryptocurrency. Laura, thanks for being here.

SHIN: Thanks for having me.

Copy LinkWhere we are in crypto’s evolution

SAFIAN: I am so eager to have this conversation, because crypto fascinates me about how you embed a new currency with trust and what’s hype and what isn’t, and how the landscape may be shifting here in Trump’s second term. You call yourself a no-hype crypto journalist, so can you give us a short no-hype overview of where we are right now in crypto’s evolution?

SHIN: Yeah, I would say we’re probably on the cusp of more widespread adoption. The number one biggest reason is simply that the Trump administration is really embracing crypto. That has not been true of previous administrations, and in fact, the Biden administration was probably, I want to say, actively hostile. I don’t know if people will love that term, but that’s probably a pretty accurate description.

For a long time, there were a lot of entrepreneurs who were cautious about doing things in the U.S., and you would see constantly there would be these popular projects, but they would always say, you can’t participate if you’re from these countries, and it’s North Korea, Iran, the United States, so that’s definitely shifting. The administration is more, not only open-minded, but even in some regards almost a little bit too embracing of crypto, you could say. The day that we’re recording is the day that the Circle IPO is happening, and that in and of itself is another sign of how this is shifting.

I think there’s going to be probably a decent number of crypto IPOs this year, but then on top of it, stablecoins are probably the first major application that has really found what the industry likes to call product-market fit. We’re seeing that stablecoins have a huge amount of uptake, especially in so many other jurisdictions where they don’t trust their local currency. It could be Argentina, which has seen hyperinflation multiple times, or Venezuela or Turkey or Nigeria. There’s just a lot of places where people don’t actually have a great way to save their money, and they maybe don’t also have really great ways to send money across borders. So, stablecoins are really fulfilling that role and Congress is probably on the cusp of finally passing legislation here in the U.S. around stablecoins. So, these are all things that kind of show how all of this has changed.

Copy LinkUnderstanding stablecoins and their global impact

SAFIAN: For a lay person, someone not engaged in the crypto world, can you just explain what is a stablecoin relative to a meme coin, relative to whatever the portfolio might look like?

SHIN: Yeah, so a stablecoin is any blockchain-based asset that is pegged to the value of some other asset. 99% of all stablecoins, they’re pegged to the value of the U.S. dollar. The way that stablecoins really took off initially was that on a number of crypto exchanges, people wanted to be able to buy and trade using dollars. I wrote this book called The Cryptopians, and it covers 2013 till 2018. Even at that time, people, they would recite back to me the price of Bitcoin or the price of Ether in dollars. No matter whether they were European or Asian or just wherever they were in the world, they always knew the price in dollars, these other places in the world that they don’t have a good way to save their money.

Here’s a really simple example, I featured this entrepreneur on my podcast. So, she’s a serial entrepreneur in Afghanistan. Her name is Roya Mahboob, and she had this microblogging platform, and I think a lot of the people writing for it were women. They had a hard time paying them, because a lot of women in Afghanistan, they don’t have bank accounts, or if they do, then their male relatives might actually take the money that they earned from them, and so they set them up with Bitcoin wallets and then taught them how to use them.

One of the women was in an abusive marriage and saved up the Bitcoin and then used that to eventually divorce her husband, so that gives you some kind of agency. I have some close Turkish friends, and I think it was in 2018, the value of the lira was just going down and down. So it’s like people in those places I think grasp these kinds of things a lot more quickly, like the value of crypto. Having a form of money that isn’t influenced by a central bank, that’s stablecoins.

SAFIAN: Because the stablecoins are generally linked to the U.S. dollar, it’s a way to sort of have dollars without having dollars, right?

SHIN: Exactly.

SAFIAN: I mean, you’re getting the stability of that U.S. market, which there’s some irony in that, because of course one of the philosophical ideas around crypto is that it’s not linked to a government, that it’s separate.

SHIN: Now, we’re going to get really deep into this. So you’re correct that this is people wanting U.S. dollars, which is a form of currency linked to a specific government, but of course the people that want those dollars are people who don’t otherwise have the privilege of easily accessing them. Bitcoin, of course, existed before stablecoins ever existed. There have been times when the Bitcoin price would go up, and then it would crash for a little while, and then it would go up again and then it would crash, and so that’s kind of when you started to see stablecoins also take off.

A lot of people view Bitcoin as a good long-term investment, but on any short-term timescale, you don’t really know where the price is going to be, so if you need the money on a shorter term timescale, then you would probably rather have something more stable, and so that’s where the interest in stablecoins came about. There’s a reason why 99% of the stablecoins are denominated or pegged to the value of the U.S. dollar, and it’s of course because we’re the global reserve currency, so there’s a lot of safety there.

SAFIAN: I mean, there’s so many different reasons people access crypto as you’re talking about, right? Sometimes it’s an investment, sometimes it is a currency basically, it’s what they want it to be more stable.

SHIN: One way to think about it is putting something on a blockchain is just giving it a certain wrapper. There was actually a business school professor who’s very pro-crypto, and he will make these funny statements, ’cause the Biden administration was just anti-all of crypto no matter what it was, and he was just saying, “That’s like saying that you’re against something because it’s not in a SQL database anymore, and now you’re using Microsoft Excel.” He was like, “The technology that you use for the ledger doesn’t matter,” but somehow the Biden administration just said, “Anything using Excel was bad.” He was like, “It just fundamentally doesn’t make any sense, the type of asset should provoke a different response based on what it is.”

Copy LinkHow Trump is shaping crypto adoption

SAFIAN: Trump seems like he’s done a full 180 on crypto. I mean, he said it was a scam during his first term and then supported very strongly in his campaign. He’s now launched his own Trump coin three days before the inauguration. Do we know how much of Trump’s crypto position is about political opportunity or financial opportunity, or some larger philosophy about markets?

SHIN: I don’t think there’s a larger philosophy. I think most people probably know what Trump’s MO is, but let’s just say he’s president and he took a luxury jetliner from the Qataris, so whatever it is that you think that says about him, it applies to his activities in the crypto world. What I will say though, aside from his personal dealings, which by and large in my opinion, they’re business dealings, things that would help his family or him. He launches this meme coin, which by the way, to make one of these things costs almost no money, so I just want to make that clear, and you’re basically printing money out of thin air, right? But then on top of that, the people who got in very early, they just had some agreement where they had to hold their coins until whatever it was, 90 days or I forget what the number of days was.

Now, fortuitously when that deadline came, he announced that he was going to have a dinner, and in order to participate in the dinner, you had to be one of the top holders of this coin, so of course the price shot up right at that time when this unlock was happening for those insiders. Just note the timing there and put those two facts together and you can make your own conclusions, but, well, let me put it this way. Trump saw that the Biden administration alienated the crypto community. He realized these people have money and they hate the Democrats, “I’m going to pick up those votes.” I think it’s so obvious to me. He said, “I’m the crypto candidate,” and he even went to the Bitcoin conference last year. He made all these promises to the crypto community and Bitcoin communities.

On top of that, people in his personal orbit, his family, realized this industry is going to get bigger, this industry’s all about money, and so they have been taking advantage. So you will see, and this is very interesting, there were a number of people that were very passionately pro-Trump during the campaign, and then once the meme coin thing happened, ’cause not only Trump, but also Melania, she also launched a meme coin, and they were not happy about what he was doing.

They still are happy they voted for him, just in the sense that they think that this administration is better for the industry, but I don’t think they love what his family is doing. In fact, it was reported that their company, World Liberty Financial, was doing deals with different token teams where basically they were just exchanging money. “I’ll give you this amount of money if you buy the World Liberty Financial token, and we’ll buy this amount of your token. I’ll scratch your back and you scratch mine.” But people in the industry also kind of look down on that, ’cause it’s not organic.

SAFIAN: So, there are people in the industry who while they may be happy to have this regulatory environment and support that the administration can offer to them, the personal activity that Trump and his family has undercut some of their enthusiasm about what that says about crypto more largely?

SHIN: Yeah. Yeah, I think some of them feel like it almost hurts the industry a little bit.

SAFIAN: You mentioned the Bitcoin conference last year that Trump spoke at. This year’s one recently closed, was in Las Vegas, JD Vance spoke. Was there any news or important signals that came out of that event?

SHIN: The main thing that I would note is that this was the first time there were literally no Democratic politicians who went. Even though Bitcoin had originally started as kind of a more libertarian thing, I would say that up until 2021, there were both sides, and it wasn’t super partisan at that point. You could say that maybe certain Republicans seemed more enthusiastic, but it was not as clear as now where it seems like the whole Republican Party is definitely pro, and then the Democrats are mixed in a generational way.

Copy LinkInside JPMorgan’s embrace of crypto

SAFIAN: JPMorgan, largest bank in the U.S. by assets, just changed a policy around crypto, now will let some clients use crypto-backed assets as loan collateral. It sounds a little arcane, but is this a big deal? Does it mean that JPMorgan is counting crypto as real money in a new way?

SHIN: It is a big deal, and it’s a big deal for actually a few different reasons. So you’re right that in a way you could say that they’re finally looking at it as real money, and the reason why this is notable is because Jamie Dimon himself has been on the record many times being anti-Bitcoin, but clearly he knows that no matter what his personal views are, that there’s an opportunity to make money here, so they’re definitely going down that road.

But the other reason why it’s significant is because you may remember in 2022 there was a series of collapses in the crypto industry, and one of the kind of contagion factors is this asset called GBTC. It was sort of like a Bitcoin ETF before Bitcoin ETFs existed, but because of the rules around how it could trade, the price was super distorted from the actual price of the Bitcoin it held, so there were times when it was trading at 30% less than the value of the Bitcoins in it. When that happened, that is partially why we saw all these collapses, because people were using that as collateral to take loans. Not everyday people, but institutions.

SAFIAN: Mostly crypto-related assets, right?

SHIN: Yes, yeah.

SAFIAN: Yeah.

SHIN: They were saying, “Hey, I have this GPTC, I’d like to put it up as collateral and take a loan,” but then when the value of it kept dropping and dropping and dropping, then suddenly they would have to top up the collateral in order to retain the amount of money that they had borrowed, or they’d have to pay some of it back, but they didn’t have the money to pay it back. Basically once you collapse, then whoever you owe money to also maybe can’t pay their bills, and then whoever they owe money to can’t pay their bills and it keeps going on.

So anyway, the reason I’m just mentioning this is that the industry is a little nervous about these types of loans, and so the fact that JPMorgan is doing a similar and obviously the Bitcoin ETFs, they literally trade pretty much in line with the value of the underlying so you don’t get those weird distortions in the market. But the point is just that the fact that they allow you to borrow money based on your Bitcoin ETFs, that is very notable.

SAFIAN: There is something that feels inevitable about the growth of crypto, maybe because it serves a real need in certain parts of the world, maybe just because it’s a way to make money, whether you’re JPMorgan Chase or the President of the United States. So, why are cryptocurrencies so volatile, and are they destined to stay that way, or should everyone be investing in crypto? We’ll talk about that after the break, stay with us.

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Before the break, Laura Shin of podcast Unchained talked about how the crypto world is changing with Trump in the White House. Now, she gives us a primer on crypto volatility and explains the impact of crypto exchange Coinbase joining the S&P 500. Plus, the best ways to test out crypto if you’re a newbie. Let’s jump back in.

Copy LinkExploring the roots of crypto volatility

You mentioned the sort of cycles of boom and bust in crypto prices in Bitcoin and other coins. Is volatility a permanent feature of the industry? Are there specific signals that would indicate crypto stabilizing more, or do you think this is just part of this kind of asset?

SHIN: That’s a difficult question. Probably one of the reasons it is so volatile is just because it’s a new market. So if you look back at the early days of stock trading and things like that, it was very similar. I’ve been covering this for 10 years. I remember 10 years ago writing articles where I was asking the same exact questions. All of these assets are very different, they all have their little particularities. So Bitcoin is very different from Ether, and Ether is different from Solana and there’s more out there, and so each one of them kind of deserves its own analysis. Every blockchain has what’s called its tokenomics or crypto economics.

You can design a token in a way where there’s incentives around it that try to get people to do different things on the blockchain itself on a network. I’m sure this is very confusing, but for listeners who don’t know, a blockchain is a ledger. You could imagine you live in Brooklyn, so imagine that everybody on your block in Brooklyn all lived in one village, and the village’s financial system was that you would gather in the town square every day at noon, and every person would just call out verbally like, these were all the transactions I had yesterday. I paid so-and-so, $10 for this cab ride, and then that person might say, I paid this other person for babysitting or whatever.

So there’s no bank, ’cause right now we rely on the bank to do it, right? You agree that the one “authoritative ledger” is in the cloud, and all it is is just whatever the majority of the ledger say, that’s the correct ledger. So anyway, point is this is the same as a blockchain, except that instead of people in your village, it’s just all these anonymous computers all around the globe that are collecting these transactions. Every 24 hours in the example of the village, or every 10 minutes in the example of Bitcoin, this new block of transactions gets added to the chain of the transactions that forms the ledger. That’s why they call it a blockchain.

So anyway, point is that of course in the village, you’re all doing it just because you want to keep the village financial system running, but in Bitcoin, the reason people do it is ’cause they can make money doing that. So, every blockchain has its own version of this where they have different incentives where they’re trying to get the different people to do different things on their network. So there’s many different functions that they could try to incentivize, but that’s sort of how it works.

That’s why when you asked this question about the volatility, yeah, all these new things are being started, so figuring out how to value all of them, I mean, that’s a whole project in of itself that could take a really long time. There have been people who theorize that as crypto grows, it will become less volatile, because all of these systems will be more mature and sophisticated and there will be better traders that are working on keeping the price at the correct levels in all these different places. But then also just the fact that all of these things work so much faster because it’s on the internet than our traditional banking rails, that could also mean that perhaps they might end up being more volatile. The reason why I’m mentioning this is just do you remember when Silicon Valley Bank collapsed?

SAFIAN: Yes.

SHIN: Yeah, and they were saying that gone are the days where you would go into the bank to withdraw your savings. Everybody was just doing it on their mobile phones, and so banks had never seen a bank run happen that quickly. So we’re in a new era, and it’s the same thing with crypto.

Copy LinkDifferentiating what’s hype & what’s solid in the crypto world

SAFIAN: How do you sort of differentiate between what the hype is and what’s solid?

SHIN: For people who are interested and who don’t want to fall for hype, you probably would want to educate yourself before you start investing in some way that puts real money at risk. So, you could take $100 or $200 and just try to do different things like using the technology, right? So you could get a little bit of Bitcoin and try to send it to yourself or someone else, you could mint an NFT, you could buy an NFT, you could buy a meme coin. But the point is just that I feel like all of those things would help you kind of understand why are people talking about this. What is the innovation here? How does this work? Then even just each of those actions that you’re doing, you would kind of understand what are the risks?

By the way, the other reason people should try this out first is because it is so easy to literally lose and you no longer have access to these funds, because maybe you lose a password or maybe you get phished, meaning a scammer sends you a link and you click on it thinking it’s an okay link, but instead it just gave them the keys to snatch all of your crypto. I mean, there’s so many security risks here, because it’s a new space and people are newbies and they don’t know what they’re doing, and so we see these scams happening all the time. Coinbase just had some people on their customer service team bribed to give away customer information.

So point is just through that exercise, I feel like you would learn a lot and then it would help you kind of understand what’s out there. But like I said earlier, sometimes when I hear people who are very critical, I’m like, your privilege is showing, because they just think the U.S. dollar will be here forever. I’m sure people who were under Napoleon’s empire thought it would be the dominant currency forever, and for a long time, people transacted with seashells, like cowrie shells. I literally keep one at my desk, I have this little cowrie shell here. This used to be a currency for a long time, so it’s just what people believe, and yeah, the younger generation probably is going to be more into this than maybe somebody who can’t think to how the world might change.

Copy LinkHow we’re all impacted by crypto

SAFIAN: Are we all impacted by crypto today even if we don’t have a crypto wallet, or is it still too early for it to be that case?

SHIN: No, we are all impacted by it I would say, because the world’s changing and the government is in competition with other governments, whether or not it likes to think that or realizes it. Bitcoin and stablecoins, they’re getting into this very geopolitical space. You see China doing all these different blockchain initiatives, and they already have their digital yuan, and they probably don’t like it that the U.S. dollar is the global reserve currency, and so they would love it if more of the yuan was the global reserve currency, right? So, the fact that they… Because they did their digital yuan a long time ago, they could use this, for instance, in their Belt and Road Initiative where they are going into develop these less developed countries, and maybe they’ll say, if you want to do business with us, then you have to pay us in digital yuan, so then those businesses start holding digital yuan.

Honestly, as a journalist just watching this all go down, especially with the way the Biden administration was so anti-crypto, I was like, oh my God, it’s just like watching Blockbuster, and Netflix is coming, and Blockbuster is not changing and doesn’t know what to do, and in fact thinks that they’re invincible. This is like literally watching the U.S. deal with crypto, and it’s very nerve-wracking as an American, and yeah, it hurts me to see whatever administration just being anti-progress, anti-technology, anti-things that would continue the U.S.’s dominance in different financial areas to benefit to all Americans. So hopefully the Trump thing will bring positive change, but like I said, his personal activities, that’s in a different category.

SAFIAN: Is enough money flowing to crypto that it impacts other asset classes yet, stock market or real estate?

SHIN: So Coinbase just entered the S&P 500, the first crypto company to do so, so if you have invested in an index fund that invests in S&P 500, you are also invested in Coinbase. Then there’s this whole slew, this is the latest trend, I’m sure it’s a bubble. The latest trend is what are called Bitcoin treasury companies or crypto treasury companies. These are publicly traded companies that are trying to accumulate, whether it’s Bitcoin or another crypto, on their balance sheet. Even Trump Media’s getting into it. They announced that they were going to purchase $2.4 billion worth of Bitcoin to put on their balance sheet. Right now, it’s a gold rush season, I guess you could say. It’s totally a bubble, and there’s likely to be some kind of crash at some point.

SAFIAN: The roots of crypto have this utopian spirit about democratizing finance, right? I saw a news report about the Bitcoin conference that said there was this divide between old school cryptos and the MAGA crowd.

SHIN: There are so many camps. Bitcoin started with something called the Cypherpunk Mailing List, which this is a kind of community of people that are technologists, but also a little bit like code is more important than the government, and so that allowed Bitcoin to then catch on with more libertarian people. Now, I mean, yeah, there’s this group Progressives for Bitcoin, and of course the Ethereum people, they’re more just these open-source developers, and they want this decentralized open system. They’re maybe not as political, and in fact, they may be more liberal progressive. So point is, yeah, now all of crypto, there’s all kinds of people into it.

SAFIAN: Well, Laura, this has been great. Thank you so much for doing it.

SHIN: Oh, yeah, I had so much fun. Thanks for inviting me.

SAFIAN: The more I learn about the crypto world, the more fascinated I am and the more confused I become. I see a lot of positives, I also see a lot of negatives. The competitive need to engage with crypto as an individual, as a political party, as a country, that’s clear enough, but for all the gains and all the support of the Trump White House and maybe because of it, the area still feels like a chaotic frontier. Then again, everything feels chaotic these days from AI to trade, to the price of eggs. All we can do: keep learning, stay vigilant about downside risks, and keep pushing forward on those levers that actually enable human progress. Easier said than done. I’m Bob Safian, thanks for listening.