Bitcoin price volatility due to ‘lack of ballast’ amid macro moves, strategist says

[ad_1]

Steve Kurz, head of asset management at Galaxy Digital, joins Yahoo Finance Live to discuss bitcoin’s decline below $40,000, volatility, crypto selling and the hiring of Blackstone executive Bill Burt, as COO of Galaxy’s asset management division.

Video transcript

[MUSIC PLAYING]

– The global crypto market. This has decreased by 10% in the last 24 hours. You are looking at Bitcoin, BTC-USD. Over the day, down around 10%, and over the last two days, down 7 and 1/2%. Bitcoin and Ether saw high volatility throughout January, despite continued efforts by social media companies towards NFT assets and metaverse transactions, partnerships this week.

To learn more about the outlook from here, we’re joined by Steve Kurz, Head of Digital Asset Management at Galaxy Digital. Joining us now, we also have David Hollerith from Yahoo Finance joining us once again. And so Steve, let’s dive right into it. Regarding the action we’ve seen over the past week, what do you think is really at stake here? And what does that set up to get into what is a heavy development environment for applications on the blockchain, but more specifically, a kind of annexation

cryptocurrencies we track?

STEVE KURZ: Yeah, thank you so much for inviting me. Look, it’s pretty normal for crypto to have volatility like this, especially on the downside. I think what’s different, obviously, and as a student of the markets you have to respect what’s happening with the Fed and in the interest rate market with the inflation numbers. And so I think everyone in the crypto market is looking at, you know, Jerome Powell and I think some of the softness that we’ve seen in crypto probably continues.

There is a real lack of ballast or anchor for something like Bitcoin price when you see these kinds of moves happening in the macro markets. So I don’t think it’s something idiosyncratic for crypto, but we’re caught up in this big move. And I think it’s going to take a bit of time to figure out in terms of the underlying streams and the technical details.

The story continues

DAVID HOLLERITH: Yes. And Steve, I mean, there are so many contributing factors, and as you pointed out, it seems like most of what’s going on here is macro. But I was just curious, are there any underestimated factors that might be playing into the crypto sector selloff?

STEVE KURZ: Well, what’s interesting is that there’s this – crypto is a hyper-liquid market, and there’s this gap between the wall of institutional interest that we see every day that takes – it’s episodic, it’s lumpy, it takes time. And then the here and now battle and the interplay between crypto and other risky asset market environments. And so structurally, I think we’re pretty constructive on how it’s going, but it’s not like there’s a marginal buyer for every dollar that sells when you have such a big down move.

I don’t see anything under the hood in terms of different aspects of crypto that is necessarily worrisome. That said, I think there are idiosyncratic stories within crypto that are – some are better than others, and some are still doing well despite this volatility, as you mentioned at the start of the segment .

AKIKO FUJITA: Steve, it’s Akiko here. Whenever we see a crypto selloff, we try to think about correlations, and often they don’t always stick. But I wonder where the institutional money went? I mean, we’ve seen that over the last year, maybe more. But as we see volatility set in on the equity side, are we seeing money flowing out of crypto?

STEVE KURZ: We don’t see the institutional money coming out. I think there’s obviously the – the obvious sell-offs that happen during times like this. The average institution, be it a hedge fund or an allocator, is actually very focused on how to get out of 0 and into 50 basis points in their crypto portfolio. So the real question is whether this sale impacts that timeline, rather than whether it actually sold out. We have a number of institutional clients, we manage some ETFs and other products. We haven’t seen anything out of the ordinary, in terms of negative flows when you think of Bitcoin or Eth. But obviously there are questions about, you know, are we in a bull market or a bear market, basically? And I think that will affect the timing, but not necessarily the final decisions that will be made.

DAVID HOLLERITH: And Steve, you know, we can’t really forget the $33 billion in venture capital funding that was raised in 2021. So I’m kind of curious, in an environment, you know, if we’re going to be realistic. It may not be like 2021, what do you think will happen to this capital increase? How would it be deployed? How do you expect to see this in the industry?

STEVE KURZ: Well, that’s a great point, and our research team did a great job of writing a report on it. And what was interesting was the dispersion. It wasn’t just growth or Series A stocks, it was really seed all the way. So there was a healthy – in the VC investment stack, it was healthy not only in the crypto verticals, but also across the scene. And so I think a lot of what’s been built since the beginning of the adventure is incredibly interesting and tied to this Web3 metaverse narrative. And then you look at it at a later stage, there’s 43 or 41 unicorns that came out of that bucket last year, and those companies really have to prove themselves and their revenue lines, and that’s a different equation for these companies.

But that’s one of the reasons we’re so optimistic. If you look at the NFT activity on OpenSea, if you think of all the big centralized tech companies that enter the metagame, when you think of the things we invest in and the funds we launch, yeah, that’s more tactical environment, yes, maybe the macro is negative. But I think the three-to-five-year stories are really strong, and that brings talent and more capital into the space. And so we’re structurally bullish, but we’re trying to cut through a bit of that market noise along the way.

AKIKO FUJITA: Yes. If we’re talking about price movements specifically, Steve, I was going to ask you if, in fact, you may have moved your year-end price target, given the volatility. Sounds like you’re even more optimistic. Mike Novogratz, we know, said it all, from what, $500,000 to $250,000. What are you looking at?

STEVE KURZ: Well, look, there are a few psychological levels that have broken down. $2 trillion in global market cap in the space, $40,000 for Bitcoin, $3,000 for Eth. You must pay attention to this. You have to respect that. I think crypto is higher at the end of the year than where we are today. I don’t know if that necessarily happens in the next month or two. I think there is work to be done in this regard.

And I think, especially, when you look at the NFT market, which is tens of billions versus the $2 trillion in crypto, you’re going to get some really idiosyncratic growth stories. This is why we focus on these early aspects. That’s why we focus on active management, quite frankly. It is a traders market for crypto, but also for macro and other assets. And we think it’s probably a good thing for crypto, overall, that you have such a broad palette to play with now from a market practitioner’s perspective.

– You know, the interesting thing right now that we’re also seeing, Steve, in space is the number of hires and executives that add up to so many of these ambitions. And you have another transition that you’ve seen within the company. And tell us why that made sense right now, and the kind of leadership of — how we might see even more of this evolution of technology leaders, financial industry leaders, entering this space.

STEVE KURZ: That’s a great point. I have never seen anything like it in my career. But the last time I saw it was really from the sell side to the buy side after the global financial crisis. It is very clear that this trend is happening now towards crypto, both buy-side and sell-side in the financial services industry, and then obviously from centralized technology to decentralized technology. We are delighted to have hired Bill Burt, who was CEO of Portfolio Solutions Group, Blackstone’s $55 billion fund-of-funds, to work with the Galaxy team.

The reason was obvious. You know, we’re trying to build a world-class institutional asset management business with several legs of the stool. And to have someone with that kind of expertise scaling a business, multiple lines of business, doing it in a regulatory compliant way, you need to have adults in the room who have done this before. I think it’s a microcosm for everything happening at Galaxy, but also in the whole crypto space. We’re growing to get to that next phase, which includes regulation and education on a large scale, and doing things, obviously, the right way in an institutional way.

AKIKO FUJITA: Yes, there are so many changes happening, almost every week. Steve, we need to see you back on the show soon. I really appreciate the weather today. Steve Kurz, Head of Digital Asset Management at Galaxy Digital. And our thanks to David as well for participating in the conversation.

[ad_2]