March Market Meltdown Left Crypto Shaken, But Not Broken | Beer & Bitcoin: QUARANTINED

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What's up, YouTube? We are your YouTube journalists and hosts Jackson and Jovan. Me back with the third episode of beer and bitcoin quarantine edition.

We are here to drink beer and talk about the biggest crypto stories of the past month.

Today we've got two very special guests. Our very own editor in chief Jay Cassano and managing editor Cristina Lucrezia Corner. Welcome to the show, guys.

Great to be here with you guys.

Hi, everybody.

What are you guys drinking today?

It's still a little early in New York, so I'm drinking a milk stout.

Brewed with coffee, and I don't drink beer. Sorry, guys, but we need to drink streets a lot.

Awesome. Well, thanks, guys.

Cheers.

Cheers.

Welcome to the show.

So everyone is having to adapt to these quite strange times we live in now, and Cointelegraph is no exception. So we also had to start working from home, as you can see. And, Jay, maybe you can tell us a little bit more about how the company had to adapt this COVID 19 pandemic.

Sure. So Cointelegraph is already a global company. So, you know, we're pretty used to working across time zones and coordinating on video calls and slack and things like that. But it's definitely been a challenge, you know, having everyone work from home. I think people are, you know, rightfully a little anxious right now and, you know, just trying to cope with that here in New York. I live in Brooklyn. You know, it took people a little while to. To sort of start complying with the lockdown and staying indoors. But now, I mean, the streets, my block is completely empty. There are literally no cars on my block. And, you know, a month ago, I had friends visiting, and it was impossible for them to find anywhere to park. So it's totally changed in just a matter of weeks. People have fled the city, and the people that are here are just not leaving their house.

And, Christina, you're kind of in the thick of it, right over in Italy. What's it like over there?

Well, we've been locked for four weeks now almost. Someday that will be the anniversary. Well, I would say that it's definitely a tough experience, especially from the psychological point of view, because, yes, we are all used to work at home, and we kind of used to use digital tools. That is not the case of so many people now, so many different professions. But we are locked from going outside. All our trips and conferences were cancelled. I actually was gonna join J in New York this spring, but it was cancelled as well. And it's very difficult for me personally to divide sometimes work and private life offline and online offline reality. But we are trying to adapt. We also trying to incentivize our team by being more but by sharing experiences and actually we've just published an article with different stories from reporters and editors all over the world how they are coping with this very unusual situation. So if you want to know more about our team, please check the article. I also experience a lot more of digitalization in different parts of life. So virtual events have become something that we experience every day. I also personally launched a digital dancing platform in order to keep myself and form. So yeah, and Internet is doing great. Even though in Italy the load on Internet connection has been, I don't know, tripled, maybe more, but it's doing great. So thank you for all Internet providers in the country.

I mean, even in New York, the Internet's been overloaded and you know, it's been definitely a lot of people both working from home and just streaming Netflix all day long. But I should add that, that at Cointelegraph, we're really lucky to still be able to keep working through this, to all have our jobs and to get to keep serving our readers and our audience through this difficult time.

Cool. And so Jackson, what do you miss the most about the pre quarantine period?

I mean, I miss going outside on a daily basis.

Don't you miss having beers with me for our classical beer and bitcoin show?

Well, we're still having beers right now, man. But I do miss seeing your lovely face in person.

Yeah, the same here.

What about you, Giovanni? What do you miss the most? I have a few answers I could say for you, but I'll let you do them.

Well, I also miss contact with people because I love being in direct touch with people and I'm still kind of getting used to this kind of virtual way of communicating. It's not the same unfortunately, but yeah, better than nothing. Better than nothing, Yeah.

I mean, it's definitely a change in lifestyle for us as well. I mean, you can see that we're here at home now, we're not in the studio anymore. So just adjusting to that lifestyle has been challenging. But like Jay said before, it's a privilege to still be able to work. So I'm happy that we're doing the things that we're doing now and it's a good way to move forward.

Jackson, do you have a. Do you have a little studio set up there? In your apartment, I have a light.

A camera, and two computers and a microphone. If that constitutes a studio, then I guess the answer is yes. Personally, I'm not sure that does, but I'm looking to acquire another light, you know, to get this side of my face a little bit brighter. But, yeah, for now, we're just kind of working with what we got at the moment.

Yeah, I think that's true for everyone.

Well, everybody really stay safe and also keep your mind healthy. That's important because it's not a usual experience to be locked down, but we need to be strong and everything will.

Be great and drink beer.

Cheers to that.

Cheers.

So moving on to the crypto news of the month. During the worldwide market crashes of March 12th, 13th, which is already becoming known as Black Thursday, bitcoin lost over 50% of its price. March 12th was the worst day for bitcoin in the last seven years. It lost over 40% of its price in 24 hours. Global stock markets also suffered one of their worst days ever. Italy was hit the hardest with the FTSE, MIB and Borsana Italiana falling nearly 17%. This was a significant moment because it proved a strong correlation between movements in equity markets and in bitcoin, something that Professor Harvey Campbell had pointed out at the end of February. Bitcoin, Ethereum. Other cryptos are more in the category of risk assets. That means they will move in big systemic events like other risk assets like stocks. The correlation held for all of March as bitcoin mirrored most major moves in the global stock markets. You can see these on dates March 8th, 9th, 16th and the 20th. Other exports began to pick up this correlation to. Matty Greenspan tweeted that in times of stress, all correlations go to one. And he pointed out in one of our recent market discussions that Bitcoin had a 0.6 correlation with the stock market and a 0.1 correlation with gold. What do you guys make of this correlation that has been coming out between bitcoin and the stock market over the month of March?

Well, okay, my correlation point is that the fact that crypto goes down together with all other markets does mean that crypto is part of the world economy. And that is at the same time a bad point, but also good one because actually we can see that it experiences the same phenomena that all the world economy does. So I think we are living all together and crypto is now indispensable part of the economy all over the world.

Yeah, I think it's indicative of.

How.

Much bitcoin and crypto more broadly have been adopted into general economic life. And how much we have traditional investors taking part in speculation on crypto assets. You know, there was a tweet from Michael Del Castillo at Forbes that I really liked about the crash. He said, bitcoin isn't magic. It behaves the way its owners behave when normal people around the world buy it because they're afraid it goes up. When traditional investors sell it because they're behaving like they always do in a crisis, it goes down. Nothing has changed. I think that's really, really true. I mean, you had a lot of likely traditional money in bitcoin that panic sold during the crash because they were panic selling everything. But then the fact that bitcoin recovered so strongly is also indicative of where it sort of differentiates from the wider economy. And there are some people that are looking at it as a safe haven asset. I think it's. I think part of what's going on is you can't really have a uniform, holistic view of what bitcoin is right now because there are lots of people trying to get lots of different things out of it. So it's going to behave somewhat erratically because there's not people, a group of people that have all had consensus on what exactly it is and how to use it.

I kind of agree with Jay when he pointed out the young age of bitcoin. I think that it's still a very young asset. And so it's very difficult right now to predict how it reacts to specific events. But I think that with the passage of time, people will get a better idea of his behaviors. And that's probably. It's going to become more stable as an asset, more predictable, at least.

Yeah, those are some really good points. And Jay brought up the idea of bitcoin, one of those narratives surrounding bitcoin, which is the safe haven asset that bitcoin could become. And a lot of people are putting a lot of weight on this current financial crisis in creating this narrative. Mike Novogratz, for example, the CEO of Galaxy Digital, says that bitcoin will continue to be volatile over the next few months, but the macro backdrop is why it was created. This will be and needs to be bitcoin's year. Dan Morehead, the CEO of Pantera Capital, another big venture capitalist firm in the crypto space, also said that bitcoin was born in a financial crisis and it will come of age in this one. However, some academics are skeptical about bitcoin's viability as a store of value. Ariel Zetlin Jones, associate professor of economics at Carnegie Mellon, does not see bitcoin becoming a store of value in the long run, saying that bitcoin is one of the riskiest stores of value in the world, with bitcoin price volatility more than five times that of gold or even US Equity prices. What are you guys. How involved are you guys in this safe haven asset? I know we talked about there being many different narratives along with bitcoin. Do you see that bitcoin will break away from the equity markets and decouple this correlation that we were talking about earlier?

I mean, I'm not really one for predictions, personally. You know, as a journalist, I look at. I try to just report what's going on and analyze it as much as I can. And, you know, now as editor of cointelegraph, I'm, you know, overseeing a bunch of really smart journalists and editors who are doing that themselves. But I think the points that, you know, that you read from Mike Novogratz and Dan Moorhead are really kind of crucial because, you know, this is exactly the scenario that bitcoin was created for. You have, you know, the, the Fed money printer meme going around right now. And, you know, the Fed is printing money. And this is why bitcoin, true believers say that bitcoin is a superior store of value or superior currency. So if this isn't bitcoin's year, if bitcoin doesn't take off this year, then I think that's actually kind of a problem for bitcoin because it means that it's missing something in terms of what its core value proposition is supposed to be.

So how much time do you give bitcoin to show these properties?

Oh, man. Well, it depends on the wider economy, of course. What were you going to say, Jackson?

Well, I recently spoke to Dave Weisberger, who's the CEO of Coin Routes, and he said that it's more about what happens in this crisis. I mean, this crisis could take years to resolve. But really what happens in this crisis is the event itself is what's going to happen. Define Bitcoin. And you know, one of the arguments against bitcoin becoming a safe haven is that it's very volatile. It is more volatile than almost any other asset out there. But he had a very interesting perspective on this, and he was saying that it's not about short term volatility with bitcoin because once bitcoin reaches high market caps, like the market cap of gold, that volatility is going to be much reduced. We're not going to see that same kind of price fluctuations, or at least the percentage difference isn't going to be as high. What really matters is, and this is what Jay, I think touched on earlier, is the critical mass of acceptance. You know, are people using it, do people believe in it, do they trust in it? And this crisis will hopefully reveal whether people can trust this hard asset in the midst of all of this money printing that's going on with the central banks.

Yeah, I totally agree with you, Jackson. And I think that people should trust crypto not only as a store of value, but also as means of payment. And this is critical for adoption and for development of crypto as a part of our everyday lives. As a person who follows different platforms where you can pay with crypto, I could say that it's definitely something that is being developing more and more actively. I don't know. I talked about dance before. We have a tango school school here in my city that is accepting crypto for payments. That's in my, in my opinion, it's incredible because it's a little city and actually two years ago nobody knew what is crypto, and now there is this opportunity to pay with crypto even in places that like, are not associated with fintech or innovative industry.

Yeah, I think that's very indicative of the kind of science you want to be watching out for. As bitcoins, bitcoin's journey evolves. You know, how's it being used, where is it being used, and when is it not correlating with other risky assets that are, that are making big movements in the markets? So for all of you viewers out there who are curious and wondering what you can look at to see how the bitcoin narrative is evolving, those are some key factors you can keep an eye on.

Long live bitcoin.

Long live bitcoin.

I just wanted to add that Cointelegraph just launched an Instagram mask where you can find out which crypto are you. So I, for example, found out yesterday that I am bitcoin and I'm happy to be bitcoin. But if you want to check yourself, which coin are you? Check Instagram of Cointelegra. And I'm excited to learn that I am bitcoin.

On March 12, the market crash impacted the defi space, the decentralized finance space. And specifically it caused the meltdown of one of the biggest platforms in the space, which is Makerdao. Makedao found itself with over $4 million outstanding debt because of the crash. So why is that? Important. That is important because Mekadao is the largest application, the largest platform in the decentralized finance space. And the Stablecoin that it issues, the DAI is powering many other applications in decentralized finance. So if Makerdao goes down, the whole defi space goes down with it. So just to explain a little bit how it works, so Makeadao is a lending platform, a decentralized lending platform. And it issues the dai, which is a Stablecoin pegged one to one to the US dollar. So if you are a user of Makerdao, you can take out a loan from Makerdao. A loan in dai. DAI is the stablecoin. In order to take out the loan, you need to put some Ethereum in a SMART contract. The value of that ethereum needs to 150% higher than the amount of DAI that you take out as a loan. That's called over collateralization. It means that and over collateralization serves on the purpose for safeguarding the platform from possible fluctuation in the price of Ethereum.

So.

If your Ethereum goes below the 150% threshold, that triggers automatic liquidation of your collateral unless you are ready to put some Ethereum to cover the losses. So that's pretty much how Makerdao works. It's pretty complicated, but that's how it keeps everything working and it keeps a very delicate balance. So on March 12, this delicate balance was kind of affected. Why? Because the price of ethereum fell sharply. Unprecedented 30 of the price of Ethereum. Sorry, Ethereum lost 30% of its price in a matter of hours. That was the cause of many of the smart contracts on the Makerdao platform to trigger the liquidation process simultaneously. And another problem was that the gas price of Ethereum skyrocketed and the Ethereum network got congested. Those two factors caused a bug in the Makerdao functioning which caused Makerdao to find itself with these four over $4 million uncollateralized DAI in the market. So the Ethereum in this contract got fully liquidated and the system didn't get any DAI in return. That's why there were over $4 million worth of uncollateralized DAI in the market. Why is that important? If such a big amount of DAI is uncollateralized, means that the peg of DAI to the US dollar might be compromised as well. And that can have catastrophic the DEFI space as a whole. So what did Makerdao did to face this crisis? What it did was it announced an auction. At that auction in which they sold Maker tokens. The Maker token is basically a share in the MakerDAO system. They sold these Maker tokens in order to buy back the $4 million uncolorialized DAI and restabilized the system. So at the end of the day, the auction went fairly successfully and they to re stabilize the system. But. There is a but. So basically the point is that even if MakerDAO managed to restabilize the whole system, the people who lost their Ethereum, the people who had their Ethereum liquidated, have not been reimbursed yet. They haven't been refunded yet. And there is an ongoing debate in the community on whether these people should actually be reimbursed. So there are someone who say these people took their risk, they should have known these people, people should have been aware of the risk they were running and that's why they shouldn't be reimbursed. Other people are saying that actually this is maker's fault because it wasn't able to handle a situation like the market crash on March 12th. So I would like to know, guys, what do you think about this issue?

Yeah, so I mean, first of all, I think it highlights the fundamental risk with using a, an extremely volatile asset like Ethereum or any crypto asset as collateral for a loan. So on the one hand, this is sort of foreseeable risk, you know, that there could be this kind of volatility that could cause people's positions to be liquidated. On the other hand, you know, I think people would say that what happened on March 12th 13th was pretty exceptional. But you know, you can argue over how much people should have been able to foresee that we were, you know, due for a recession anyway and so on and so forth. I think the questions that remain are, you know, did the MakerDAO protocol function correctly and did it do enough to protect users in this scenario? And I think that's what people are really focusing on. You know, we published a lot of great articles over the past week, past couple of weeks at cointelegraph on this. You know, there was one earlier this week talking about a crypto venture fund that won about 68% of all of the auction DAI that came in from the March 28 auction. So, you know, there's a lot of movement happening right now to try to stabilize MakerDAO. But it still is sort of teetering, I think, on what is going to happen next. And it's the faith people are going to put in. It depends on reassuring them that something like this isn't going to happen again.

Yeah. I would like to add that it's also media responsibility in covering these events very delicately because rumors of MakerDAO shutting down actually created a lot of panic in the market and it could definitely impact the situation even more. We had an opportunity. Our head of news reached Rune Christensen and actually he was put in contact with his team. So we followed all the discussions within my qdao, the community that were searching for solutions because it's definitely a difficult situation to handle and it's important how quickly do the company react, but also it's very important how media coverage the rumors that are appearing in the industry.

Yeah. And actually if I can add on that, you know, another part of that is not just talking to the people at the top like Rune, which is of course really important and essential for us, but also, you know, we have reporters who are following discussions and debates that are going on the MakerDAO forums. You know, and there's that. There's a huge thread about, you know, do we compensate vault holders that were completely liquidated? And that. That's a massive thread right now. And, you know, we're following that, we're following debates like that. So we're getting both input from the top of these organizations and from the ordinary users as well. Yeah.

So basically, media serves as a mediator between different actors of the industry. And it's a very big responsibility on us because basically we accumulate different opinions, different problems, different issues and try to just present them as objectively as we can.

To me, this topic is crucial regarding. I mean, this MakerDAO meltdown has a huge impact on the reputation of the whole DEFI system. So it opened the eyes on the fact that DEFI system, the DEFI infrastructure is relatively fragile and fundamentally unprepared to face events like the market crash on March 12th. So that event was considered a black swan. So something that is unpredictable and cannot be predicted. But on the other hand, we are in the crypto system. We are in the world of very volatile assets. So I think that these kind of events should be taken into consideration and.

I'd love to hear from our audience what they think MakerDAO could have or should have done differently as well. I think that'd be a valuable point of input for us as reporters and editors.

So this week the news came out that Binance has acquired CoinMarketCap. This is a pretty big move. There were some numbers being thrown around about how big the deal actually was. It's unclear about what the exact figure was, but for Someone in the space making moves like this at this particular time, it is a really interesting, interesting decision.

Yeah. I think, you know, the, the big question is, you know, why did Binance want to acquire cmc? And, you know, it's worth noting that Binance says, you know, okay, we're not going to start charging for listings on cmc. And they say, you know, we're not going to influence the rankings or try to manipulate trade volume or anything like that on cmc. At the same time, you know, for now at least, we kind of have to take their word on that. We can't confirm that. We can't say what's going to happen in the future. So, you know, at cointelegraph, we're just going to continue, as always, to report the facts of what's going on there. But in terms of why they acquired it, I mean, I think any exchange right now is trying to find ways to gain new users. And if I had to speculate, I would say that they're hoping that they can convert people visiting CMC and sort of direct them towards Binance and make them become Binance customers and users.

Yeah, definitely. Coinmarketcap has traffic, has data, and has an experienced team. So I think this is something that Binance is always in search of in the space. CZ and all his team seem to be really people who think a lot about the community and about different ways of attracting more people into the space, of course, becoming their clients.

Well, I'd say, you know, even even though we don't have the numbers confirmed, you know, there are a lot of numbers circulating that I don't think are worth really paying attention to right now because there's nothing that's actually publicly disclosed or I think even sourced from any kind of, you know, formal, you know, merger documents or anything like that. So, you know, again, cointelegraph, we're not. We're just going to report the facts of what's happened there. But I think what's notable, aside from the specific numbers, is that you have a major acquisition, regardless of the exact amount, happening right now in the middle of an economic crisis. And to go back to some of our earlier conversation today, that is somewhat indicative of, you know, the crypto economy being separate and somewhat resilient to these general market economic downturns. So I think it's a pretty big deal that Binance went out and made this massive acquisition. Right now you have an international multinational company making a massive merger play at a time. And I can't think of any other industry where that's happening right now. Certainly there are no airline companies or hotel chains doing that at the moment.

Yeah. But at the same time, I think that it could have happened by inertia in the sense that it definitely had to start months, if not years ago. So this is something that had to happen now. I would also like to highlight this little detail that Brandon Chess, who was founder of CoinMarketCap, actually stepped out as executive top manager and CMC's chief strategy officer became its CEO, Carolyn Chan. And I think it's a very interesting thing because Brandon, who was not at all public, who was a person that was definitely famous and he, I imagine, did made a lot of money out of his project that went so well and he should be kind of young person and he steps out. It also reflects a bit, in my opinion, what's happening in the space that we already see that some generations change. So even within our space that is so quick, that is so young, we see already people who, like, got everything that they wanted and they just want to relax and concentrate, dedicate more time to families and their hobbies. I think this is an interesting case to think of and I'm really glad that the space has now one more female CEO. Congratulations, Carolyn.

Cheers to that.

Yeah, all Cheers to. Thank you everyone for watching. The cointelegraph editorial team wishes you a safe and healthy quarantine.

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