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Bitcoin prices won’t crash, says insider

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Yahoo Finance’s Julie Hyman and Brian Sozzi discuss the price action and outlook for Bitcoin with Alex Mashinsky, Celsius Network Co-Founder and CEO.

Video Transcript

JULIE HYMAN: Bitcoin specifically and crypto more broadly continues to fall this morning. Yesterday we had the rollout of Bitcoin adoption in El Salvador. This morning, we're learning from Coinbase that it received a Wells notice from the Securities and Exchange Commission having to do with a product it's developing that would allow users to earn interest on their investments.

Let's talk more about the big picture here for crypto right now. Alex Mashinsky is with us, Celsius Network cofounder and CEO. Alex, it's good to see you again.

I actually want to start on this Coinbase story because I wonder if it's being interpreted as a sort of shot across the bow on the part of the SEC in terms of beginning to look at how it's going to regulate crypto, even though Coinbase says it doesn't quite get what the SEC's quibble is.

ALEX MASHINSKY: Yeah, it's definitely a conundrum there as far as the SEC actions. Obviously all of us are looking for clarity, and it would be great to understand what is covered by the CFTC, what is covered by the SEC, what are the laws and regulations that we all need to follow. And so definitely an interesting story and interesting development.

BRIAN SOZZI: Alex, Mark Cuban, longtime Bitcoin fan, tweeting this to what Coinbase CEO Brian Armstrong had to say yesterday. He says, "This is regulation via litigation. They"-- I guess the SEC-- "are incapable of working through this themselves and are afraid of making mistakes in doing so." Just is the SEC, do you think, just not prepared in any way to even understand crypto, let alone try to regulate it?

ALEX MASHINSKY: No, I think they're pretty sophisticated, and the issue is really understanding who are the good actors, who are the bad actors, and then defining the rules to make sure that we enable innovation, enable this development of these new rails of finance, but at the same time protect consumers.

So I think we're going through these murky waters right now, and we need to get clarity, and it's just going to take a little bit of time before we get the rules and we can actually start running, you know, faster.

JULIE HYMAN: Well, of course, the backdrop for that lack of clarity today is that the price is falling and has been falling now for a couple of days. What do you think is behind it? I mean, it doesn't seem like what happened in El Salvador yesterday and some of the glitches, which one could expect, were really responsible for the big drop, or were they?

ALEX MASHINSKY: I don't think it had anything to do with El Salvador. I mean, I think last time I was in your show, we talked about the resistance level at that $50,000 to $53,000 level for Bitcoin, $4,000 levels for Ethereum, and we hit that resistance. We had a lot of retail users go long on leverage, and basically what you've seen is flash liquidations or basically traders taking the opposite position, liquidating over almost $4 billion worth of longs, and effectively about half a million retail users were taken out of the game. Again, most of this volume has been on offshore exchanges, and it really had nothing to do with El Salvador, just a coincidence.

BRIAN SOZZI: Alex, you know, just staying on the leverage topic, given the leverage that is, in fact, in the crypto system, are you concerned what we're seeing today and yesterday too just in terms of the crypto rout, that might get worse? Because look at the sentiment around the SEC, you name it. Sentiment seems to be going south. Do you expect another leg to drop here in Bitcoin and other crypto prices?

ALEX MASHINSKY: Well, let's put this in context. Every major US bank is leveraged 10 to 20 to 1, and the people who trade in derivatives every day may be leveraged up to 50 to 1 or more. So in that context, the crypto market is not leveraged.

And we had several stress tests March of this year-- sorry, May of this year, March of last year in which the crypto market did not need any intervention from the Fed or from regulators. It basically took care of its own. So I don't see any problems today.

I know regulators, again, are trying to protect the retail consumer, and I agree that we should not allow retail consumers to just get 20 or 50 to 1 leverage. It just doesn't make any sense. But again, like I said, most of these transactions that we talked about, that $4 billion, most of that was offshore and didn't really involve many US users.

JULIE HYMAN: So put this all together for us, Alex. What do you see in terms of price action then over the next month, three months, six months?

ALEX MASHINSKY: Well, so we tested support this morning, the lowest from yesterday, and I think that's a good indication. If we have enough volume from new buyers, we should go back and retest that $53,000 to $55,000 level. If we break through that, we will see new highs this year.

I'm still holding my projections that we will be hitting the $140,000 to $160,000 levels. It might take us into Q1 of next year because of this kind of flash crash and clean up we've seen with the Chinese miners, but it's definitely going higher.

It took 12 years to get the first 100 million users into Bitcoin. It took five months to double that. So now there's over 200 million users worldwide that hold Bitcoin, have accounts. So it's definitely accelerating. We're seeing the hockey stick. And more demand means higher prices.

JULIE HYMAN: Alex, you are certainly not alone in the crypto folks we talked to. Like, you guys are never bearish, if I may. And I'm just curious, you know, what would make you so? I mean, I don't think we have talked to any crypto person in the last year who said that the price was not going to go higher, and not even eventually, like 10 years from now, but, you know, talking in a 12-month time frame. And so I'm wondering, what would make you bearish or what do you think is the biggest risk here? Is it the leverage issue, or is it something else?

ALEX MASHINSKY: Look, you can check my Twitter. March and April this year I said too much, too fast, and I expect a correction. You know, I said we're going to go down to the $29,000 level. And, you know, it's not like it's a straight line up.

But Bitcoin is not the cause. Bitcoin is the effect. The cause is trillions of dollars of monetary printing. Again, over 40% of all the dollars that ever existed were printed in the last 12 months, and that debasement is something that is driving more and more people to look for alternatives, look for more safety.

And Bitcoin is effectively a doomsday insurance policy. It's the best insurance policy you can buy because it has scarcity, because no matter what government or law is enacted, there's not going to be ever more than 21 million bitcoin.

So I think it's just a question of allocation. And as this asset class becomes a larger and larger allocation with more and more people, prices are going higher. But it does not mean that we will not have correction or we don't have side action or uncertainty. So it's not that everybody is a bull all the time.

JULIE HYMAN: Copy that. And Brian Sozzi apparently pays much closer attention to your Twitter than I do. Apologize-- apologies, and he confirms that your price predictions have been pretty spot on.

Alex Mashinsky, thank you for being here. Good to see you. Celsius Network cofounder and CEO.