Crypto market ‘geared toward institutions’ amid correction: Elwood Technologies CEO

Elwood Technologies CEO James Stickland joins Yahoo Finance Live to discuss crypto volatility, rising rates, and the outlook for inflation.

Video Transcript

BRAD SMITH: Welcome back to everyone. Crypto volatility is escalating, with Bitcoin dipping back below $30,000, falling in tandem with general markets, as high inflation and rising interest rates, that continues to take a little bit of a toll on investors here. Joining us now to discuss, we've got Elwood Technologies CEO James Stickland. And James, there's much more at play than that right now, too. There's also some of the jitters that have certainly been inserted into the broader crypto equation because of what we saw with Luna and Terra last week as well.

JAMES STICKLAND: Yeah, very much so. As you say, there's a huge amount of volatility in crypto. I think there's a number of macroeconomic events that have obviously collided at the same time as the continuation of this market volatility on pricing. It's certainly driving a huge amount of volume and a huge amount of trading, both people buying the dip, as well as people on a sell-out basis, too.

JULIE HYMAN: And so what are you seeing in terms of your business, right? Because you guys operate sort of the bones, if you will, of some trading platforms, the back office. So if you've got this real drop in prices, does that mean you're seeing lower demand?

JAMES STICKLAND: I think what we're seeing is, basically, high volumes, peaks in volumes, as you would expect in a period of this nature. I think whether or not that flattens out a little over this next kind of week and month as people look at the last week's activities and sort of trading outcomes.

But certainly, we saw huge volumes, as you would expect, from Wednesday through Friday of last week. I think people have been dusting themselves down over the weekend. You know, crypto is still very much a 365 days a year market model. So the sort of institutional activity over the weekend was certainly lower. And people have been being sort of re-addressing and re-engaging in the market this morning.

BRAD SMITH: We were discussing in one of our conversations last week that there's a flight to quality right now in crypto. Could that in the near term as well continue to an added loss in the broader market cap in kind of the global coin equation?

JAMES STICKLAND: Yeah, look, I think as we all know, there are 16,000 plus kind of instruments out there, you know, 850 or more kind of venues. So there's a lot of choice. And I think there's certainly an institutional desire to have safety around either the venues that they're working with, the liquidity providers that they're working with, and also that the coins and tokens that they're using and trading with.

The synthetic kind of nature of crypto, the derivatives market is still very kind of popular, and obviously, the flows, demanding there hugely over this last week. But yes, I would concur there's very much a sort of institutional desire to want to go to a safe haven or a safe harbor with recognized coins and tokens.

BRIAN SOZZI: James, why hasn't cryptocurrencies really stood up to that notion that they are a good hedge during inflation?

JAMES STICKLAND: Look, it's a good question. I think that there's certainly been a lot of returns that have been generated, as we've seen in crypto. But it is still very much a volatile asset class, but with volatility comes opportunity. So I think there is still a huge amount of desire and appetite. There's obviously the information which we all saw last week with some of the stablecoin challenge.

And again, learnings and experiences are coming from a lot of institutional investors at this point. So the knowledge base in the market is still growing. I'm not saying it's immature, but it's certainly a market that needs to gain a lot more knowledge and awareness before that institutional flow becomes a standard.

BRAD SMITH: And so with that acknowledgment, the core difference in this crypto winter, perhaps, versus prior crypto winters is, indeed, the large money, the institutional money that is also invested in the space right now. And with different prices that they perhaps entered into Bitcoin or other crypto assets as well, what type of near-term impact could that have for prices right now? And then even longer term, should we see more buying activity coming into this? How would that also prompt some swift reaction from even some of the retail investors out there, too?

JAMES STICKLAND: Yeah, look, I think you're absolutely bang on that the flow that's now involved in crypto and the transactional traded volume is geared towards institutions, which gives it that longevity and the long-term asset class. I think that it's not weighted to the retail market as it was back in the '17, kind of '18 crypto winter, which gives everybody far more comfort, the far more kind of opportunity as well when you think about some of the long-term holdings here.

So, yes, there's volatility. And I think we're all seeing that, and we're all kind of acutely aware of it. But obviously, with that volatility comes margin opportunity. And therefore, the sort of portfolios of funds and the portfolios of family offices and institutions themselves, putting money to work in crypto is still providing great returns, albeit associated with the appropriate risk levels.

JULIE HYMAN: Of course, there's people putting money into the cryptocurrencies themselves, and then there's also people investing in crypto infrastructure, like you guys. You guys just completed a $70 million series A funding round with folks like Barclays and BlockFi that were involved in this. Now it's series A, so I don't know how much funding you've done before, but I am curious, as you've raised for the company, how things have changed over time, as we have seen the market for currencies go down.

JAMES STICKLAND: Yeah, look, you know, it was, I'm sure, very fortuitous timing, but the beauty with the investors that we've taken as part of this cap raise are invested in this kind of asset class for the future. Infrastructure-- and clearly self-promoting message, but infrastructure is going to be essential here to make sure that it can withhold and sustain the institutional appetite and flow that, obviously, there is, making sure that connectivity and the [INAUDIBLE] connectivity and the capability of reconciling books is really done in the same way that you'd expect other asset classes, be it FX or equities, are delivered in the digital and crypto space.

So we were blessed to be working for quite a number of months with a number of tier one institutions, both natural finance providers, as well as digital providers, and trying to bring them together to be able to get a sizable round concluded so that we can, again, invest for the future of crypto infrastructure.

JULIE HYMAN: James, thanks for being here. James Stickland is Elwood Technologies CEO. Appreciate it.