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Bitcoin has ‘knocked gold off’ as the inflation hedge: Opimas CEO

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Octavio Marenzi, Opimas CEO, joins Yahoo Finance’s Alexis Christoforous to discuss the rising treasury yields and the outlook on bitcoin.

Video Transcript

ALEXIS CHRISTOFOROUS: Welcome in Octavio Marenzi. He is CEO of Opimas. Octavio, good to see you. So you just heard that conversation there with Jared. I mean, look, when you see yields rising as they are in the bond market, shouldn't that be seen as a positive thing? I mean, it's reflecting that the economy is bouncing back. So are these fears of higher rates a little overblown, do you think?

OCTAVIO MARENZI: Well, I think it's really interesting if you see how the interest rates have actually shifted. And there seems to be a real kink at sort of the three-year bond mark. So up to about three years, there's no change. It's still interest rates are really very, very low. Once you get to three years and beyond, we sort of have seen an upward surge there, so the yield curve sort of becoming steeper there.

And so what that says to me is people are concerned about inflation about three years out and that the Fed will have to sort of start to increase interest rates around that time frame. So that fits well with what you just were talking about, Powell saying they're going to stay on QE until 2024. At that stage, you might have to start raising interest rates again.

So that's why I think up to the three-year mark we're seeing no change, very, very low interest rates still. And beyond that, they're starting to shift up. And I think people are concerned about inflation taking hold.

ALEXIS CHRISTOFOROUS: Are there sectors that you see as benefiting from the steepening yield curve, and are you moving things around in the portfolio as you see the activity unfold there in the bond market?

OCTAVIO MARENZI: Well, the sector that traditionally benefits more than anyone else from a steeper yield curve is the banking industry because they basically borrow at short-term rates and lend out on longer-term rates. I mean, that's a gross simplification of how a bank works, but in essence it's that. So that is a move that is actually quite good for the banks, for the lending business. And they should see a boost to their net interest margin as a result of that.

And you can see that in the bank stocks over the course of the past month or so. They've been actually seeing some interesting activity, where things are moving up and doing quite nicely. So it's a sector that's outperformed sort of the broader market, certainly outperformed the technology side of things over the course of the past month as we've seen these interest rates changing. So they should benefit from that.

And also on the trading side, as we see these shifts in interest rates, people have to rebalance their portfolios. And that's pretty good for them on the trading side, on the fixed income trading side of things.

ALEXIS CHRISTOFOROUS: And what we've seen a lot of recently, Octavio, is people making lots of moves in the commodities market, right? We've got gold down about 3% today, silver down almost 5%. But traditionally, aren't these inflation hedges? Or maybe perhaps Bitcoin has now taken on that role. But it looks as though investors are starting to price in an inflation premium in this market. So what does that mean for our traditional inflation hedges?

OCTAVIO MARENZI: Well, I think you're absolutely right. The traditional inflation hedges would be gold and maybe silver and things like that. And there used to be, I think, that would be where people concerned about inflation would put their money. Bitcoin stims have taken a lot of that activity away from gold. So you're left with gold now more being sort of momentum players. People are looking at that and say, well, I'm just going to buy as it goes up and down, like any other asset, and they're not really look at any sort of the fundamentals of it.

So Bitcoin has taken that away, it seems, has knocked gold off its pedestal. I do wonder what happens with Bitcoin over the course of the next year or so. I do see there's some risk that the central banks try and shut it down because they increasingly look at it as sort of a competition, or they come out with their own digital assets and try and replace it.

So I think there might be a rough ride for Bitcoin down the road at some stage, and we'll have to wait and see how that works out. And at that stage, maybe the money pulls back into something like gold. But for the time being, Bitcoin is the inflation hedge, it looks like, and gold has been knocked off that position.

ALEXIS CHRISTOFOROUS: I also would like to get your thoughts on the oil markets. You know, there are some analysts out there who are now saying that $100 crude oil is not a far reach. I know it pulled back a bit today. It's been hanging out at around $60 a barrel. But are you making any big moves when it comes to energy at the moment, and oil in particular?

OCTAVIO MARENZI: Not really, no. I think OPEC has been very successful in sort of stabilizing the oil price and has been very successful in terms of putting through production cuts. And I think-- unusually. Usually that's much more difficult for them to do. And basically now with oil, we're back to sort of pre-COVID levels, even though demand has come way, way down.

So if you look at sort of the US market, about 70% of oil is used in transportation. Transportation is way down. Airlines are way down. Demand for oil is much, much lower than before. And we've been-- they've been able to recover the price of oil back to pre-COVID levels simply by cutting back on supply. Now, as demand starts to increase again, I think they're going to loosen the supply, and they're just going to manage the price level and try and keep it fairly stable.

So I don't see big moves coming in oil in either direction. I think it's going to hover around where it is for the time being. OPEC is managing it very, very tightly, or managing the supply very tightly to make sure we get price stability there.

ALEXIS CHRISTOFOROUS: And before we let you go, I want to ask you a quick question about earnings, particularly Airbnb. The stock is on a tear today. Results were not as bad as expected, but is the market a little too euphoric about Airbnb, do you think?

OCTAVIO MARENZI: Well, I mean, that's putting it very kindly, isn't it? I mean, the results were not as bad as expected. Their revenues were down 22% this last quarter. For any other company, that would be an absolute disaster. Now, people were expecting it to go down even further.

I suppose once we return to normality, Airbnb is pretty well positioned. The question is, of course, is that going to happen and when does that happen? So far, we really haven't seen that much return to normality. A bit in the US, but in other markets around the world, not at all. It seems like lockdown rules are tightening more than anything else.

So Airbnb is not just a US company. They have larger international operations and large amounts of their revenues coming there. That's going to not return to normality anytime soon, it looks like.

DashDoor is an interesting one to sort of juxtapose them to because they're sort of the opposite end of the spectrum. They are sort of dependent on the epidemic carrying on and lockdowns carrying on and people continuing to order food from them online. And if things return to normality, then DoorDash is in big trouble. And I think it looks like they're in big trouble anyway. That's a very difficult market to achieve any sort of reasonable margins in at all.

ALEXIS CHRISTOFOROUS: Yeah, lots of competition there. And actually just a note for our viewers, we're going to be speaking with Airbnb's CEO Brian Chesky in the 4 o'clock hour. For now, though, I want to thank you, Octavio Marenzi, CEO of Opimas, for joining us.