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The trouble with crypto

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Coins Tether (USDT), Bitcoin, and Ethereum are illustrated on a multicolor background.

Coins Tether (USDT), Bitcoin, and Ethereum are illustrated on a multicolor background. (Justin Tallis/AFP)

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Cryptocurrency has been having a rough couple of months lately. From bitcoin to ethereum and Coinbase, hundreds of billions of dollars have evaporated in crypto markets. But things got really bad last week, after a coin that’s supposed to be stable turned out not to be.

All this is having consequences. People who jumped into crypto during the pandemic, amid the rising visibility of celebrity endorsements and crypto influencers on TikTok, are losing real money. But the problem goes beyond that.

“It’s such a huge part of our financial system now,” said Anita Ramaswamy, a crypto and fintech reporter at TechCrunch. “This is really important because it’s not just limited to crypto. And it’s not going away. So even if you don’t particularly hold crypto, I think it’ll have some broader economic effects.”

And in case you’re still wondering what crypto is even for, you’re not alone.

On the show today, Ramaswamy explains what’s behind the crash and what it means for the future of cryptocurrencies. We’ll also provide a mini-explainer on “stablecoins.”

Later, good news about little kids and COVID vaccines, and will Russia and the West break up their energy relationship?

Plus, “Make Me Smart” fan art, and why you may be wrong about fly-fishing!

Here’s everything we talked about today:

Your donation powers the journalism you rely on. Give today to support “Make Me Smart.”

Make Me Smart May 17, 2022 transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

Kimberly Adams: Hello, I am Kimberly Adams, welcome to Make Me Smart, where none of us is as smart as all of us.

Kai Ryssdal: I’m Kai Ryssdal. And what we do on Tuesdays for those of you who are new is we take a single topic and devote the first, like 15 minutes of the podcast to that with somebody who really knows what they’re talking about. And Kimberly and I asking really good question so we all get a little smarter. And today, we’re gonna talk about crypto, because, wow, have you seen what’s going on in crypto? Bitcoin to Aetherium and Coinbase. And everything. Hundreds of billions of dollars have vaporized. And that’s real money, by the way. And that’s why we’re gonna talk about this.

Kimberly Adams: Yeah, and we should say, like, not all of this has happened overnight, but part of this downturn really just accelerated last week. And it’s having real effects, especially for people who maybe jumped into crypto during the last two years of the pandemic, and you know, have a little bit of FOMO. And we’re really excited about getting into this big new thing. And now those people are losing a lot of money, and it’s really affecting a lot of folks.

Kai Ryssdal: So we have gotten an actual expert on the line. Her name is Anita Ramaswamy. She’s in crypto. And she does, she’s a crypto and finance tech reporter at TechCrunch. And Anita, thanks for coming on.

Anita Ramaswamy: Yeah, it’s it’s great to be here.

Kai Ryssdal: Alright, so look, as Kimberly said, this is not all happening sort of like, you know, instantaneously, it’s been a while that crypto has been a little janky. But it does mean that in the last week that things have kind of fallen off the table and how come?

Anita Ramaswamy: Yeah, so there are a lot of factors that have kind of led up to this. But really, the magnitude of this is pretty, pretty huge. I mean, crypto was worth almost $2 trillion in industry coming into around two weeks ago, and now it’s a lot closer to 1 trillion or 1.1 trillion. So that is a lot of value that’s been lost. And I think it’s coming sort of in conjunction with a broader sell off in tech stocks and the market in general. So there are a lot of economic factors that I think have led to, you know, stocks in general falling, but I think crypto specifically being a risky and volatile asset the market is really showing that, you know, this is this is something that when the broader markets go down, crypto is gonna go down, too.

Kimberly Adams: Was there something in particular? Well, obviously, there probably was like, what do we know about what triggered this particular crash right now?

Anita Ramaswamy: Yeah, so I would say there’s sort of two categories. And the first is just broader economic factors. You know, we’re still very much experiencing the aftermath of the pandemic. And it’s not just aftermath, you know, we’re still in it in a lot of ways. And I think, you know, companies in general, their costs have gone up, right. So we have these supply chain issues, we have some geopolitical instability going on. You know, we have a mismatch between supply and demand and a lot of industries. And that’s across the board. That’s not just with crypto, but I think that’s why we’re seeing a broader sort of market downturn. But when it comes to crypto specific factors, not only are all of those issues, but I think there are sort of, you know, maybe two categories of problems that are going on. And the first is that trading volumes are down. So people are not really, you know, wanting to speculate and they don’t want to take risks, because there’s a lot of fear around some of those economic issues. You know, another one of those is like interest rates going up after a really long time. But the second more crypto specific issue is exemplified by what happened with the stable coin called UST run by TerraForm Labs. And that stable coin while it wasn’t a huge part of discussion, you know, outside of the crypto community before really drew a lot of attention because of losing its price peg to the U.S. dollar. So it’s called a stable coin. It’s supposed to be stable, and its price just absolutely plummeted last week, and people are talking about that.

Kai Ryssdal: Yeah. So before we get into the, to the really, really nitty gritty of stable coins, which just fascinate me particularly, algorithmic stable coins, right. Help me understand why. If I don’t have anything in crypto money wise, why is this important?

Anita Ramaswamy: Yeah, I think it’s important because this year, a lot of people who hadn’t invested in anything before joined the market and they specifically invested in crypto. If you look at sort of the statistics of who these investors are like a lot of, you know, just average, people saw promise in this industry and saw a lot of hope and started, you know, buying up these assets, because they thought it was a get rich, quick sort of scheme or a way to make easy money. And at the end of the day, I think this is really important, because it’s not just limited to crypto, I mean, it’s such a huge part of our financial system now. And it’s not going away. So even if you don’t particularly hold crypto, I think it’ll have some broader economic effects. And it’ll also be interesting to see what it means for, you know, retail investors for the average person who’s just investing their funds in different assets, you know, what happens in the crypto industry? Because it’s so new and it’s so unregulated? I mean, we have new technologies pop up like that all the time.

Kimberly Adams: I mean, and I also want to get into sort of the nitty gritty of, of what went down last week, but you know, when we’re talking about these people who jumped into crypto in the last like, year or two, yeah, there was like this get rich, quick element. But we shouldn’t ignore the fact that there were celebrities and athletes and a lot of people in finance and on CNBC, like in all these other financial news sources, saying like, this is a real thing that you should get into? I mean, what is your take on that and how people were being sort of pumped up for it?

Anita Ramaswamy: Yeah, I think there was a lot of excitement and exuberance, and a lot of companies making really big promises that they ultimately couldn’t keep. And I do think that the underlying technology, the blockchain is valid. And there are a lot of use use cases for the blockchain, that that could actually really help society and help average people, but a lot of the value and a lot of the money that’s flown into, flowed into the industry recently has just been, you know, to these projects that they’re, they’re super hard to understand. And it’s kind of, you know, almost separate from the reality of people’s everyday lives. And I think a lot of, you know, there’s been a lot of excitement, but not a lot of education about the risks. So if you look at some survey data, just just showing the risk tolerance of people who got into Bitcoin, who got into Aetherium, who started buying crypto last year, a lot of them have a lot higher of a risk tolerance. But at the end of the day, now, I mean, what you’re seeing is a lot of fear. And so the second that these cryptocurrencies started falling, people are getting scared, and they’re realizing what that risk actually means. And I think when you heard a lot of these celebrities, you know, talking about their projects, all they talked about was the promise of crypto as a whole, but they didn’t really talk about, you know, what can happen in the meantime, there’s always the risk that this can go to zero, it’s not regulated.

Kai Ryssdal: Right, right. Right. And the thing about it is that everything was hunky dory with crypto give or take until all of a sudden wasn’t which gets us to stable coins, and Terra and Luna, and algorithmic stable coin. So just to set the stage here a stable coin is a coin that is supposed to be stable because because it is backed one to one by U.S. dollar assets, right. The algorithmic stable coin, which is I think, what really focused people’s minds last week, the algorithmic stable coin combo of Tara and Luna went haywire in as layman’s terms as possible, because this gets weedy in a hurry, but in as layman’s terms as possible, what happened and why.

Anita Ramaswamy: Right, so a stable coin can back any currency. But in this case, Taro was supposed to – one UST, which is the Terra currency, one UST was supposed to equal one USD one US dollar, and that link got broken. And the reason behind that is that UST doesn’t have reserves in the traditional sense. So like when you think about, you know, when the U.S. dollar used to be backed by bars of gold, right, that was a reserve system, and it works similarly to what a stable coin is supposed to do. So there’s a type of stable coin where you have a cryptocurrency, it’s supposed to back the U.S. dollar, and there’s actually like a vault of U.S. dollars sitting somewhere physically. So you know, that that peg is going to hold. But in the case of Terra, because it’s an algorithmic stable coin, it was using a much more complicated back end system where it involved you know, buying up other cryptocurrencies and there wasn’t actually a physical reserve of US dollars to back it. So that link ended up getting broken because of some of the volatility with other cryptocurrencies and therefore, one UST didn’t equal one USD anymore. In fact, one UST was trading as low as like nine cents on the dollar at some points this week.

Kai Ryssdal: Wow.

Kimberly Adams: Was there something in particular that started this sort of spiral of it heading down?

Anita Ramaswamy: Yeah, it was basically sell offs from another decentralized finance project. So one of the other cryptocurrencies that was backing Tara experience to sell off and it was just sort of a small thing, like it wasn’t something that you would expect to completely destabilize the entire crypto industry. And you know, Terra itself. It’s like the third largest stable coin but even stable coins are sort of, or it was the third largest, even stable coins are just a niche and crypto at this point. So I think it was just one of the as things where something really small and unexpected sort of went wrong, and then it triggered the sort of domino effect.

Kai Ryssdal: When you’re out and about talking to people, and you say you cover crypto, do they generally understand what you’re talking about? Or are they like, man? What is that? It’s like hocus pocus magic, I don’t even know.

Anita Ramaswamy: No, it’s super confusing. And honestly, even for me, like, I have a finance background, and I feel like I learned something new every single day. I mean, this industry, it’s moving so quickly. But I think the one thing it has in common with finance, that a lot of the concepts are things that we’re familiar with, and aren’t actually that complicated, but there’s a lot of jargon to describe them. So I think like crypto as an industry has just created, like, done all this gatekeeping and created all these fancy terms. And, you know, at the end of the day, it’s like, it’s not, it’s not that impressive.

Kimberly Adams: Terra is just another cryptocurrency at the end of the day, and there have been other stable coins that failed in the past. So why was this one in particular, so significant that it really just caused all of these downstream effects in the rest of the crypto industry?

Anita Ramaswamy: I think it was just the moment and the timing, like with the broader markets being down, people were already getting scared. You know, I think investors were starting to become fearful. And at this point, you know, crypto has grown so much in the past year, and it’s been unsustainably fast. Like, I think a crash in prices was coming at some point. And it was sort of inevitable. And this just happened to be the thing that came along to really make people fearful. And, you know, once that sell off starts, I think it continues on, and it’s gonna keep going. I think the other reason that it’s particularly important is because of what regulators have said about it. So Janet Yellen came out last week, and she was talking about the UST situation, and she said, like, we need to regulate stable coins. And I think, especially in the U.S., there’s just not been a lot of clarity on regulation. And I think now, law enforcement, and you know, the government really want to start cracking down on this industry.

Kai Ryssdal: You know, it’s funny, though, I mean, bitcoins been around since what, like 2009. And yeah, and for those who are in the no stable coins, and tokens, and all of that have been around for a number of years. So there’s a little piece of me that’s like, hello, regulators where you been?

Anita Ramaswamy: Yeah, yeah, exactly. And I think it’s just it’s such a confusing industry that like, regulators might not even know where to start or exactly how to regulate. I think everyone agrees that regulation is needed, but like, what to do was a big question.

Kai Ryssdal: Right?

Kimberly Adams: Yeah. And what even to regulate, because they’re just getting around to regulating like, Bitcoin and stuff. And now they’re like, oh, gosh, we have to look at at stable coins. What’s happening to all these people, especially these retail investors, who are losing everything?

Anita Ramaswamy: Yeah, I mean, a lot of people have lost a lot of money. And I think that’s where it comes down to, like, there hasn’t been a lot of education. And there’s definitely not been adequate education around this. Because if you were to invest in crypto, I mean, the expert advice is that you shouldn’t have more than like, 5% of your investments in crypto, because it’s super risky. And it’s super volatile. But a lot of the messaging from these companies ended up being that you know, “buy Bitcoin, it’s a hedge against inflation. Like, if inflation goes up, Bitcoin is going to be stable.” And none of that really turned out to be true. So unfortunately, a lot of investors made – like retail investors, average people made much bigger bets than they maybe should have. And I think in the long run, a lot of them might be okay. Especially if they’re holding, you know, Bitcoin and Etherium that have been around for years and years and have been volatile for years and years, too. But you know, in the short term, if people get scared, and they start selling off, and then they lock in those losses, it’s going to be really bad. And it’s unfortunate.

Kai Ryssdal: How far back just as a way to wrap this up, or actually, let me rephrase the question, not how far back but do you think this weeks or the last – guess it’s last week’s sort of crisis in crypto. But more specifically, the the realization that it’s a little bit of a house of cards. Crypto is.

Anita Ramaswamy: Yeah.

Kai Ryssdal: Do you believe that that sets back its inevitable march toward actually becoming usable money? Right, because it will get there. The question is when?

Anita Ramaswamy: Yeah, I think it definitely does. I think the that all of the volatility is just really difficult. If you’re trying to build a product for the long term, you need things like stable coins, right? I mean, there’s so many different reasons why stable coins are useful, but they actually have to work. And I think that’s where, you know, people are, I think it’s a good thing that people are going to start questioning that technology behind the industry, now. I think a lot of times, it’s like, let’s just trust it. Let’s trust the engineers. Let’s trust the people who built this and you know, it’s all going to work out. But right now, those claims really need to be pushed back on a little bit more. I think it absolutely will slow the growth of crypto and I don’t think that’s a bad thing.

Kai Ryssdal: Anita Ramaswamy, she’s a crypto and fintech reporter at TechCrunch making us all smart on  crypto and stable coins and all that. Anita, thanks a lot. Appreciate your time.

Kimberly Adams: Thanks.

Anita Ramaswamy: Yeah, thank you.

Kai Ryssdal: Would you take your paycheck in crypto. That’s my question to everybody, whenever they say, “Hey, what about crypto?” I’m like, would you take your paycheck in?

Kimberly Adams: And some people would, there was a pretty vigorous, vigorous discussion on the fan-run discord today about like, whether the media in particular are doing a good enough job or have done a good enough job, warning people about the downside risks of crypto in the coverage. And, you know, like, it’s been a hard thing to cover, because I remember our early discussions about it were like, should we even give this attention? Because it looks like a house of cards. And then it’s like, well, we can’t ignore it. Because it’s showing up everywhere. And it’s a huge segment of the market now. But at the same time, how do you explain it in a way that helps people understand without like, getting folks to jump on a bandwagon of something they don’t fully understand?

Kai Ryssdal: Yep, I think it’s I think it’s a huge challenge. I think it’s a huge challenge.

Kimberly Adams: Okay, well let us know what you thought of this conversation. What surprised you if anything or what you think is missing from the conversation? Our number is 508-827-6278 also known as five await you be smart or send us a voice memo at And we will be right back.

Kimberly Adams: Newsfixes. Yes.

Kai Ryssdal: Yes, I think we’ve got our, at least two of ours kind of line up. So why don’t you do your first one, then I’ll do my first one. And then because they are of a pair, I think.

Kimberly Adams: Yeah. So I mean, there’s this great piece in Vox that asks a really fundamental question that I think a lot of people are asking right now. “What is the point of crypto?” and sort of the subtitle of it in this piece by Emily Stewart: “Crypto is a solution in search of a problem, or problems.” With this idea that what you said earlier, a lot of the promises, or what Anita was saying earlier, a lot of the early promises of crypto just have not come true. And so you have this technology, that now we’re like okay, well, if it’s not exactly great as this financial instrument for retail investors, what is it good for? And is it just only to live in the domain of like the super techy you know, people with advanced mathematics degrees to use amongst themselves or for criminals to use to move money internationally across borders. And it’s a really good look. And also another one of these nice just explainers of how things work and a sense of the scale of where we are with this. So I thought that was pretty good.

Kai Ryssdal: Yeah. And also Emily Stewart really good just as a plug for her. Okay, so mine is news that came out this morning from Coinbase, which is if not the granddaddy of crypto exchanges, then it’s certainly one of the first and biggest movers in that space. It said today in light of the drubbing that crypto has been on the last number of weeks. Here’s the quote from them this morning. “Given current market conditions we feel it’s prudent to slow hiring and reassess our headcount needs against our highest priority business goals.” So this is a real world implication of this magic money kind of evaporating value, right? People are not going to get jobs, it is possible that people are going to lose jobs, right reassess headcount needs is is not very, you know, tricky code for maybe there are going to be layoffs. You know, Coinbase shares are down 74% year to date, amid, you know, the decline in Bitcoin and all the other prices, because people are getting out and they’re losing money coin base as a business. And I think it’s a real world implication of this mythical thing that crypto has become, and we should just all be ready for that.

Kimberly Adams: Hmm.

Kai Ryssdal:  Yeah.

Kimberly Adams: Yeah. I just, I still feel really bad for the people who maybe were convinced by names and faces that they trust to get into something that they maybe didn’t understand.

Kai Ryssdal: Here’s my all time yeah, sorry to interrupt. Here is my all time favorite. History comes back to bite you in the butt repeatedly, thing. So you remember those ads with Matt Damon? That aired during the Super Bowl, him touting crypto and this and that: “Fortune favors the brave.” Okay. Fortune favors the brave, was said in history by Pliny the Elder. As he sailed toward Pompeii, to investigate Mount Vesuvius, Pliny the Elder dies, after saying Fortune favors the brave. I would just like everybody to understand history. Isn’t that great? I love that.

Kimberly Adams: Great.

Kai Ryssdal: Anyway. Sorry, was that a little geeky, a little too much?

Kimberly Adams: It’s great. It’s great. You know, love, love a little, little, little ancient history of thrown in with the, you know, we like it old and we like it. Now. That’s something borrowed something blue, etc, etc. My other story is just a really quick one that today the – ooh, hit my mic. Today, the FDA announced that they are going to expand booster eligibility for five to 11 year olds, which I know a lot of folks are happy about because the pandemic is not over. And that’s specifically for the Pfizer Biontech vaccine booster and we still don’t have a booster for itty bitty kids yet, or a vaccine for little kids. So I was talking to a friend of mine who wants to come to visit D.C., but they’re trying really hard to wait until they can get their baby vaccinated before they get on a plane. And it’s hard.

Kai Ryssdal: Oh, it’s got to be brutal. I can’t imagine actually, just the, I mean, just the stress, in addition to regular raising a child stress. Okay, item number two for me, it’s a quickie. I just want to point out that a lot of producers in the oil and gas world Chevron among them are predicting that once Europe gets all the way out of its Russian oil and natural gas contracts. They’re never going back and Russia is going to be permanently isolated. And I think that would be a fascinating and interesting geopolitical development. Because once that huge producer of oil and gas gets isolated, then what do we do? Oh, Kai says we’ll shift to renewables because that’s what a market forces are going to do. Well, we’ll see. I don’t know. Anyway, just a little little tidbit from the Financial Times there. Anyway. Alright, let’s do the mailbag.

Kimberly Adams:  I love that, “thinking and feeling a lot of things.” First up a tweet from Make Me Smart listener, Audie Norman, who is an artist and just created some really fun, Make Me Smart Fan art that makes us look like superheroes, which is pretty freakin awesome. Obviously, you can’t see it on a podcast, but we are going to have it on our show page. But just for a description. We both have capes. We both have pretty cool weapons. There’s a little bit of…

Kai Ryssdal: You’ve got Thor’s hammer man I’ve got, I don’t even know what it is. You’ve got Thor’s hammer. That’s the weapon.

Kimberly Adams: I do. Yeah. And we’ve got like armor and we’re looking very superhero-ish. We’re always if I may say so myself. Got greaves on our legs and everything. Yes, I have played enough games to know that those are called greaves.

Kai Ryssdal: Yeah, I’m like what are greaves. What are those? For real on those questions.

Kimberly Adams: Are greaves on the arms or on the legs?

Kai Ryssdal: I don’t know.

Kimberly Adams: I think gauntlets are on the arms.

Kai Ryssdal: Somebody’s gonna know, somebody’s gonna know. One of our listeners will know.

Kimberly Adams: I think it’s called greaves.

Kai Ryssdal: Yeah, anyway, so we will, we’ll put that on the show page. It’s it’s fun stuff. We are as you know, in the middle of fundraising, all sorts of gifts are yours for the offering including the Jasper tumbler named Kimberly’s cat who by the way, we heard his bells yesterday. Did you hear that? I did. I heard the bells. That was great. Here’s here’s anoother fundraising idea. Let us know what you think about this one.

Jody: Hi, Kimberly. This is Jody calling from Las Vegas. I know you probably already have all your gifts planned out for your fundraising efforts. But I did have one suggestion. In light of Kimberly’s love of cocktails and bitters. I think if you could make a line of cuts and bitters called Kimberly’s not so bitter, that would be a fun idea. Thanks for making us smart, bye. That’d be great.

Kimberly Adams: Oh, but I am bitter so often.

Kai Ryssdal: That’s a whole different podcast, that is a whole different podcast. Good suggestion though Jody, good suggestion.

Kimberly Adams: Maybe the line, it’s like Kimberly’s not so bitter. Kimberly is bitter. Kimberly is petty.

Kai Ryssdal: Kimberly’s actual bitters. All right, we’re gonna go we’re gonna leave you with this week’s answer to the Make Me Smart question, which is once again, what is something you thought you knew, but later found out you were wrong about?

Kimberly Adams: This week’s answer comes from Patrick McCray. He teaches histories of technology and science at the University of California, Santa Barbara. And I interviewed him recently on Marketplace Tech about the evolution of the technology behind the iPod. And so here was his answer to the Make Me Smart question, which I love because it had really little to do with tech.

Patrick McCray: So I used to do a lot of rock climbing and whenever I would be driving all throughout the West, I’d see these guys standing in the river waving sticks at the water and I would think that is just the dumbest thing possible. But once my partner moved to Colorado about seven years ago, I took up fly fishing and especially during COVID It’s been a really wonderful way of getting outside and just kind of relaxing and yeah, it’s much more fun than it looks.

Kimberly Adams: Fly fishing, he said, he was like yeah, I used to think fly fishing was really dumb.

Kai Ryssdal: Yeah. But you know sometimes you just need like a moment of zen man and that’s what fly fishing – I gather. I don’t I’ve never done it but I gather that’s what he gets here which is, you know, whatever works for you. Right? Whatever works for you. Do us a favor, keep sending us your answers. via voice memo to our email make me Excuse me. Make me is what that is sorry, I have no water in the studio. Or you can leave us a message 508-827-6278 which is of course 508-U-B-SMART.

Kimberly Adams: Make Me Smart is directed and produced by Marissa Cabrera. Ellen Rolfes writes our newsletter and our intern is Tiffany Bui.

Kai Ryssdal: Today’s program is engineered by Jayk Cherry. Mingxin Quigan s going to mix it down later. Ben Tolliday and Daniel Ramirez composed our theme music. The senior producer is Bridget Bodnar. Donna Tam is the director of On Demand. Marketplace’s Vice President and General Manager is Neal Scarbrough. Tuesday in the books, everybody take the rest of the day. How about that? No?

Kimberly Adams: I wish, I gotta get on a plane today.

Kai Ryssdal: Oh no. Going somewhere fun?

Kimberly Adams: Uh, St. Louis.

Kai Ryssdal: Well, that is fun.

Kimberly Adams: Yeah.

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