The recent market sell-off ‘has not deterred’ crypto investors: Grayscale CEO

Grayscale CEO Michael Sonnenshein speaks with Yahoo Finance Editor-in-Chief Andy Serwer at the World Economic Forum in Davos, Switzerland, about how crypto investors are responding to the recent market sell-off and the rise of Terra.

Video transcript

RACHELLE AKUFFO: DC Attorney General Karl Racine is suing Facebook founder Mark Zuckerberg over the Cambridge Analytica scandal. Now the lawsuit alleges that Zuckerberg played a direct role in the moves that set the stage for the data breach and data gathering. Now Racine says that policies at Facebook allowed for misleading information about the company's privacy policies, which ultimately led to the exposure of personal data for millions of Americans. Now this is the second time Racine has sought legal action against Zuckerberg, after the first motion was denied earlier this year by a judge.

Right, well, the World Economic Forum has officially kicked off. And Grayscale CEO Michael Sonnenshein is weighing in on the state of the crypto market. Take a listen.

MICHAEL SONNENSHEIN: Well, I think we have to examine crypto in the context of what's been happening in the broader markets, right? You've seen rising rates in the US has caused a lot of volatility in a lot of different asset classes, crypto along with it. The recent selloff, though, from what we're hearing from investors, has not deterred them. If anything, they're looking at it opportunistically. And a pullback like this is nothing new in the crypto space.

ANDY SERWER: What's your take on how aligned crypto is to other financial assets? There's a lot of controversy there. Is it a hedge? Does it go in the same direction or not?

MICHAEL SONNENSHEIN: Our standpoint on this is, largely, when you're looking at something like Bitcoin, you're looking at something that, for us, really does look, feel, and act like a digital gold. And if you look out over a longer time horizon, you will see crypto being uncorrelated to other asset classes, although, oftentimes, to your point, it is scrutinized because we do only have the last 10 plus years of trading history to really examine.

ANDY SERWER: Correlation, that was the word I was looking for. So, just a couple of other hiccups this year regarding Terra and Luna, and I'm wondering what your opinion is there.

MICHAEL SONNENSHEIN: Well, the recent Terra event, as everyone knows, really allowed a lot of investors to evaluate the stablecoin ecosystem as a whole. This is a very important component of keeping liquidity in the crypto space, but avoiding having to go back to the traditional financial system. When you have an event like this, though, investors take a step back. They're examining other stablecoins, like USDC and others, and really just ensuring that they're operating as they're intended to do so.

I find-- and I've been in the crypto space, as you know, over the last eight years. We do see a lot of one-off events like this. And what you do see on the other side of them is that the crypto ecosystem is very resilient, lessons are learned, and we keep building, and we actually come out stronger.

ANDY SERWER: With regard to BTC, you mentioned store of value. Has your thinking changed between store of value and currency and the use case for Bitcoin?

MICHAEL SONNENSHEIN: It honestly hasn't. We also have to, again, remember we're only 10, 12 years into the life cycle of Bitcoin. And when you think about how much it's developed over this last decade plus, a lot of people criticize it for not becoming an overall currency, to go buy a cappuccino, to pay your rent, things like that. But if Bitcoin is successful-- and it largely is very successful already-- there's nothing wrong with its solo use case being as a digital gold, a gold 2.0, a gold for a new and younger generation.

ANDY SERWER: Right, some of those people are saying, like, this is-- crypto is a solution in search of a problem.

MICHAEL SONNENSHEIN: I don't agree with that necessarily. I think that Bitcoin represents-- and the crypto ecosystem as a whole creates a more equitable, more inclusive financial system. That's certainly a very large topic here at Davos this year. And I know that we and a lot of others are excited to dive into it.

ANDY SERWER: Where do things stand with trying to get an ETF approved by the SEC, Michael?

MICHAEL SONNENSHEIN: Well, the Grayscale team has been putting the full resources of the firm behind getting our largest fund, the Grayscale Bitcoin Trust, ticker GBTC, converted to an ETF. Now, this has been something that we, as an organization, have been working on for at least the last six plus years. Ultimately, this is an investor protection issue. There are over 800,000 accounts in the US alone, all 50 states represented, that own shares of GBTC.

And so, when we're working proactively with regulators to have them bring the ETF, to bring it closer into the regulatory perimeter, to give investors additional protections, additional disclosure, we think that we, and hopefully the SEC, is going to do the right thing here and approve the ETF, because investors have been patient. And quite frankly, they deserve a spot ETF.

ANDY SERWER: And final question, Michael, with regard to regulation overall, are you sanguine about the pace of change there?

MICHAEL SONNENSHEIN: We're spending a lot of time in DC, and that's also a reason that the Grayscale team is here at Davos. Regulation around crypto and the entire ecosystem is paramount. One thing that we really would like to see is, certainly, on the heels of the White House executive order, what you've seen out of the UK government, what you've seen in Germany recently, a lot of governments are moving their policies and procedures forward, and we'd like the US to do the same thing here. We need to see regulation beyond just enforcement, so that we have the proper regulatory frameworks to foster the innovation, to create job growth, to create products and services, to ensure that the innovation around this technology remains in the US, and we don't lose our competitive advantage there.

SEANA SMITH: That was CEO of Grayscale, Michael Sonnenshein, at the World Economic Forum in Davos earlier today.