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Bitcoin is an antidote to dysfunction: Demirors

CoinShares Chief Strategy Officer Meltem Demirors joins Yahoo Finance Live to discuss Bitcoin’s recent price action, her outlook for cryptocurrencies, and why she thinks ‘Bitcoin is an antidote to dysfunction’ that can be added to portfolios.

Video Transcript

MYLES UDLAND: All right, let's pivot our conversation now to what we've been following the last month. It actually has been exciting where we've kind of had this interminable grind towards finally getting stimulus done. There's been a lot going on in the crypto space, some news out this morning with regards to Ripple and seeing some concerns there over whether it is indeed a security. And we'll get into that a bit. We see Bitcoin up about 3%, trading right around $23,500 or so.

And joining us now to talk more about everything going on in the crypto space is Meltem Demirors. She is the chief strategy officer over at CoinShares. Meltem, great to talk with you this morning. Let's begin with the question I kind of have to ask all of our crypto guests, which is, why is 2020 so different than 2017? And sort of how are your conversations changed in the last couple years?

MELTEM DEMIRORS: That is the question we get often. And thanks for having me on. It's always a pleasure to be here with you and with Julie. So, look, what's different this year is this. 2017 in many ways felt like 1999. In 1999, people didn't know if they were buying or It was just a wild, very frothy time, and I think 2017 for many of us felt the same way-- a lot of coins, a lot of names, a lot of capital flying around.

This cycle is so different because the narrative is very focused on Bitcoin. We see major investment banks. We see central bank governors talking about Bitcoin. The CIO of Guggenheim came out last week and said his price target for Bitcoin is 400K. Ruffer Investments put a billion dollars into cryptocurrency.

We have MassMutual in the US adding Bitcoin to its general balance sheet. This is an insurance company that is regulated and governed using very high standards in terms of risk and allocation strategy. So the world just looks and feels very different. Bitcoin is being talked about in the same way that, you know, investors are talking about other allocations.

And at the end of the day, the climate has just shifted completely. I think your last guest, Greg, said it perfectly. The last nine months in this country, in our economy and markets, have been dysfunctional. And Bitcoin is an antidote to dysfunction that you can buy in your portfolio. [LAUGHS]

JULIE HYMAN: Hey, Meltem. It's great to talk to you. I always like the way that you explain Bitcoin for people who are not sort of immersed in the crypto world. I would-- you know, you sort of were just talking about not only why 2020 is different from 2017 but why it's different from 2018 and 2019. You know, the world around us is quite different.

And a lot of people have been telling us that, oh, institutions are getting involved now in Bitcoin. I guess I'm still having trouble understanding why. Is it just a matter of diversification for them? Is it chasing price? I mean, what-- what has changed, you know, in terms of the institutions thinking about crypto?

MELTEM DEMIRORS: Yeah, that's a great question, Julie. And always such a pleasure to chat with you as well. So here's what I think is really interesting about 2020. And you set it up perfectly. Everything in the world of investing and the world of markets is relative. The biggest conversation I would have with investors in 2016, '17, '18, '19, there was a lot of conversation around volatility.

Bitcoin historically, relative to markets and the options investors had, has felt volatile. But this year, Bitcoin's volatility is at all-time lows, and the rest of the world, other asset classes, other markets, have gotten way more volatile. I was just running the numbers. Tesla, this year alone, up 655%. Bitcoin up 226%.

So in terms of the universe of options, in terms of the universe of investments that people can be making right now, $5 trillion of dry powder sitting on the sidelines. So what are people going to buy? Things are overvalued. Tech is overbought, right? The valuations are skyrocketing. Things are trading at your 2025 forward PE multiples, right?

A 2,500 PE multiple, that's not normal. People may not necessarily want to allocate their cash there. And so I think Bitcoin has become much more attractive as the world around us is changing and the options that allocators have are changing.

And we see this not just with Bitcoin, right? We look at housing prices, all-time highs. People are buying properties. People are buying land. Art auctions, all-time highs. Collectibles trading at all-time highs. People are looking for places to put cash in a zero interest rate environment.

And they're thinking about the long-term impact of taxes. Bitcoin is a great asset that someone can buy and hold long term, right? We love to use the term "hodl," but it really is a great place for people to be allocating when they're thinking about long-term value creation and long-term growth opportunities.

So I do think that the world around us changing has been really important for changing the perception that people have of Bitcoin, particularly investors and investment committees who are looking around and saying, wait a minute. How are we going to hit target return rates in an environment where we can't buy treasuries? Fixed income is basically on ice, right? They need to start thinking outside the box.

And I think Bitcoin is here. Markets are more liquid than ever. Options markets are very robust. Ways to access Bitcoin are more, you know, diverse than ever. We have $2 billion in assets under management just in our exchange-traded products. So there's a lot more availability. There's a lot more capacity for the industry to also absorb those inflows.

ZACK GUZMAN: Why do you think-- why shouldn't Ripple-- let's switch gears to Ripple. Why should Ripple--


ZACK GUZMAN: --be classified as a security? Ripple is coming under fire today, potentially, by the SEC, saying that it violated investor protection laws. At the heart of the debate is, should it be considered a currency or security? Where do you stand?

MELTEM DEMIRORS: Yeah, so my stance is very clear and simple. You know, I'm not a policymaker. I'm not a judge. I'm not a jury. I'm not an executioner. What I do think we've seen-- and we deal with regulators in the US, in Europe, and in other jurisdictions. At the end of the day, I think the issue in the US is we've seen very inconsistent enforcement here in the US.

It does feel, right, to us as the industry that the regulators in this country are picking winners and losers, and that's not really the role of a financial regulator. I don't want to comment too much on the wealth statement that came out from Ripple this morning regarding this SEC case. But at the end of the day, you know, what I've long maintained and what I've testified about in front of Congress last year is Bitcoin's fundamentally different from every other cryptocurrency.

Bitcoin is not like anything else. The way that Bitcoin was created, the long distribution cycle, the fact that it's been in the market for 12 years, there's no CEO of Bitcoin you can call. You know, if you wanted to file a lawsuit against Bitcoin, you couldn't even begin to do that because there is no one entity that controls Bitcoin.

Ripple is very different. It has a CEO. It has a company associated with it that is domiciled in the US. So we'll be watching it play out just like everyone else. But I don't have any other comments other than, you know, I wish we had more regulatory clarity so that people could operate in a compliant manner.

I really don't think anyone in the industry is, you know, wanting to not be compliant. I think the big challenge is really, this is new. It doesn't fit cleanly into one specific agency or one specific area of oversight. And I'd love to see more dialogue between industry and policymakers so that we can--


MELTEM DEMIRORS: --form rules. Mm-hm.

JULIE HYMAN: Sorry, on that front, just very quickly, I want to ask if, in this incoming administration, you expect more consistency and communication.

MELTEM DEMIRORS: I'm not sure. Frankly, some of the initial bills we've seen-- two weeks ago, Rashida Tlaib and some House Democrats came out with a bill called the STABLE Act that I felt was quite concerning. You know, the Biden administration is going to have a lot of Goldman bankers and BlackRock executives as part of it.

I think what we are seeing is a struggle between the cryptocurrency world and the legacy finance world. And so the fact that this administration is filled with legacy finance folks who, you know, directly oversaw what happened in 2008, to disastrous results, and are now directly participating in the largest roll up of power in modern history, including in the financial sector, you know, not encouraging to me.

But we'll have to see what happens. We're going to be here fighting the good fight, though.

MYLES UDLAND: All right. Meltem Demirors is the chief strategy officer over at CoinShares. Meltem, great to get your thoughts this morning. Thanks so much for joining. Next time we talk, it'll be 2021, so we can talk about why it's different than 2018, maybe--

MELTEM DEMIRORS: And you know--

MYLES UDLAND: --if we don't see the kind of sell-off--

MELTEM DEMIRORS: --what? I want to drop one more fact. $1,200 stimulus check, if you'd put it into Bitcoin, you'd have $4,200 right now. So maybe Bitcoin will be our marshmallow test for 2021.

MYLES UDLAND: And I think you and I both know that a lot of those $600 checks are probably going to find their way into Bitcoin as well. We'll see how that plays out in the months ahead.

All right, Meltem Demirors, thanks so much for joining us.