Bitcoin is rallying again. The question is whether it is a short squeeze that fades or proof that crypto winter is over. Joining me is Paul Howard, Senior Director at Wincent. Paul, welcome back to the show.
Hi, Johnny. Thank you for having me back. Thank you very much.
Bitcoin is rallying. Is this a short squeeze or a real sign that crypto winter is over?
Prior to coming on the show I did a quick search to find out how many times people mentioned in the media that crypto was dead in the last 12 months, and we saw that spike around Q1 and Q2 this year. I get a sense that we are never truly in a crypto winter until we see the phrase Bitcoin is dead. What we have seen in the last seven days is a rally of around 25% in the price of Bitcoin. My sense is this has been partly driven by a short squeeze — the initial drive higher was led by people who were flushed out of the market and liquidated. And since then, over the last five days, we have seen around $3.5 billion of ETF purchases. That is a decent inflow of capital and has now put prices touching the $80,000 mark. So I think it is a mixture of both — a short squeeze in the first phase, and now we are settling into more institutions loading up with ETFs, all evidenced by on-chain analytics.
How could the Clarity Act and onshore derivative rules reshape US crypto market structure?
It is super exciting. It is the first real big piece of legislation that will create an effective new market for derivatives onshore in the US. Previously there has been a lot of ambiguity between whether the SEC or CFTC had regulatory responsibility. With the Clarity Act coming hopefully next month, we are going to see more delineation of who is regulating what. That should open up onshore US derivatives — where previously people had to go to offshore exchanges to trade these products, which excluded a lot of financial companies, family offices, and businesses from the market. This cycle will see the ascension of new rules allowing and opening up a new US onshore market.
Stablecoins are officially mainstream. Where do they go from here?
Earlier we had the GENIUS Act which effectively made stablecoins mainstream — 1-to-1 backed US dollars versus a digital representation. What we are going to see over this next cycle is these stablecoins being used for trade execution, trade financing, cross-border payments and remittances. If you think about the traditional FX world, it is built on a two-plus-two settlement basis. Digital assets can be in and out of your account within ten minutes. That significantly shortens the lifecycle for moving money around the world. We are going to see a lot more use cases. The average person on the street owning stablecoins, getting yields far higher than cash in their bank account, and stablecoins becoming a major part of the infrastructure between financial companies.
ETFs are now this prevalent. Is there still a real need for OTC trading desks?
Yes, absolutely. Just because you may be buying an ETF does not mean you are buying the underlying spot. What we are going to see in this cycle is a lot more interaction with OTC desks — where players like Wincent have the technology, the book, and the risk appetite to warehouse, hold, and trade these assets. An OTC provider is there for execution — how to manage price fluidly without driving it up or down. And especially with the incoming derivatives regulations around onshore perps, this is all going to play into more flow transacting over the counter.
Meme coins and NFTs dominated the last cycle. What is driving this one?
Before that we had DeFi summer. Before that we had various cycles in this asset class. I think the next cycle looks more like an institutional-led asset class. We are going to see assets and infrastructure that can scale into financial markets being the backbone of this rally. A lot more will be traded in stablecoins. And as we transition away from what has been a retail speculative market into more of an institutional play, I think we have a cycle that is going to reflect a lot more on what protocols are doing, on the transmission of money, and on Bitcoin as digital gold as a very valuable opportunity for institutions to lead the next cycle rather than speculators.
Awesome. Well, thank you so much for joining us. Definitely appreciate your time today.
It is always a pleasure. Thank you, Johnny.
