Why bitcoin and stocks sell ‘in tandem’, explains Valkyrie CEO

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Valkyrie CEO Leah Wald joins Yahoo Finance Lives Julie Hyman and Brian Sozzi to discuss bitcoin selling and crypto prospects.

Video transcript

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BRIAN SOZZI: Bitcoin is on one of the worst start of a year in quite some time with the benchmark crypto down around 8% so far in January. Is there any relief in sight for the Bulls, however? Leah Wald is the CEO of Valkyrie, which is a key player in the crypto investment space. Léa, nice to see you this morning. Listen, tough month for the Bitcoin Bulls, is there anything more at stake here below the surface other than fears of an interest rate hike affecting some of these riskier assets?

LEAH WALD: Yeah, and thanks for having me. You’re right, it was really hard. Bitcoin is down almost 40% from its November high. Bitcoin has sold for six consecutive days dating back to last week, moving largely in tandem with stocks. And much of this correlation, we believe, is due to institutions and funds investing in both traditional and digital assets, taking risks until that uncertainty dissipates.

So although prices have fallen to between $ 40,000 for the first time since August, they have found support and we believe they are gaining a foothold. So it is now above $ 41,000, almost 3% on the day, and it appears to be consolidating, but it is still far from the all-time highs set last year. And for us who have been in Bitcoin for a while, we are used to this, so we are looking at this technical level.

JULIE HYMAN: Hey, Leah, it’s Julie here. You’re used to this, but not a Fed tightening cycle, are you? I don’t think Bitcoin has been around since we had a very large tightening cycle here in the United States. So, I mean, how can you even predict what a new asset is going to do in a situation like this where liquidity is coming out of the market?

LEAH WALD: Yeah, it’s unprecedented. I think you are absolutely right. From what we’re seeing, traders are certainly worried that a hawkish Fed will raise interest rates faster than expected. Analysts expect four rate hikes this year rather than the three previously reported. And rising rates, as you know, generally point to a risky environment. And that usually sees preferred bonds versus riskier assets like stocks and certainly digital assets.

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So I think you are absolutely right. It is an unprecedented environment, from the pandemic to what is happening in the Fed at all levels. So I think it’s particularly important and prudent to watch these technical levels, as well as Bitcoin’s fundamentals, which I will point out have actually been strong.

BRIAN SOZZI: Leah, this weakness that we’re seeing in prices and, really, I would say an uncertain outlook, is that hindering or hindering the adoption of Bitcoin among institutions this year?

LEAH WALD: Yeah, I think that’s a really good question. I don’t think it bothers or hurts, actually. And I think because we saw such a strong adoption last year, but also as we approach the end of the year. And you see it very importantly in institutions, speaking and working with fund managers, and also generally in stocks.

A bright spot that people don’t think about often, but Bitcoin mining stocks have risen over the past year. As an industry, they have generated over $ 15 billion in revenue and have far outperformed the broader indexes. Also, a fun note, but they can be used as an ESG-focused socially conscious wallet as most miners, especially in the US, actually use renewable energy, such as solar, wind power. or hydroelectric for their platforms. So, I think if we think about it in the different parts of the industry, there are definitely some shining lights that can still be found that I think we will continue to see adoption in certain ways.

JULIE HYMAN: Leah, I want to talk for a moment about your ETF, the futures ETF. It was the second on the market here in the United States. It is followed with Bitcoin, unsurprisingly, and has seen a downtrend. And when you talk about adoption, you may not have had the cash that you might have hoped for. Tell me about this fund, how it’s commercialized at this stage, and what you’re hearing from potentially interested people.

LEAH WALD: Yeah, absolutely. So I would say that I cannot speak specifically about the performance of the fund, but what I can say is that the response has been positive. We are satisfied with the performance of the fund because we believe that being smaller than the others has allowed us to have less tracking error. And that’s because we were able to stay in the contracts from the month before, the futures.

So I think in terms of demand and influx, we’re very interested in what this quarter has to offer. Again, I think a big, and from what we’ve heard, big fund managers, big wealth pools have been waiting to see how different futures, ETFs have tracked and how they managed their roles.

So I think this could potentially be the quarter where they finally feel more comfortable, or not, with our performance or that of others, and they will see that as potentially a portfolio allocation. And, hopefully, passes their investment committee. But we expected that it would take a little longer for the big institutions to really start buying these futures ETFs, and not take center stage.

BRIAN SOZZI: Well, thank you for keeping this real for us. I know these have been a tough few weeks in all things crypto. Leah Wald, CEO of Valkyrie. We will talk to you soon.

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