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Elon Musk sent crypto into a downward spiral: Strategist

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Travis Kling, Ikigai Asset Management Founder joins the Yahoo Finance Live panel to discuss the latest with the cryptocurrency sell-off.

Video Transcript

ZACK GUZMAN: But first, as I said, Bitcoin nearly wiping out the entirety of its gains at one point today in just the last week. About a half a trillion dollars in market cap wiped off the board overnight, essentially everything on Yahoo Finance's board here in the red, deep in the red. The only one you see there in the green is Tether, the stablecoin. Even major exchanges Binance and Coinbase running into issues with user withdrawals, as investors rushed for the exits.

And here to make sense of the sell-off we're seeing as it plays out today, happy to welcome back into the program, Travis Kling, Ikigai Asset Management Founder and CEO. And Travis, you know, the number one question whenever you see sell-offs like this, is everybody out there kind of wondering themselves, too, should I be selling? What's your take on maybe the collapse we're seeing now and the rapid intensity of it today?

TRAVIS KLING: Hey, Zack. Well, it's going to be cloudy in the morning here in Los Angeles with a high of 67 during the day. You can expect an overnight low as clouds come through the east side at about 57 degrees. There's a 30% chance of rain tomorrow. And oh, wait, sorry. Am I not applying for a weather position for Yahoo Finance?

ZACK GUZMAN: [LAUGHS] Yeah, I mean, I wish that's what we could talk about today. Instead, it's just complete carnage.

TRAVIS KLING: Totally kidding here. Just got to keep a little bit of a sense of humor about you during times like this. Look, you know, big sell-off today, big sell-off over the last week. You know, Bitcoin's down 35% month to date when I checked a few minutes ago. Definitely a lot of volatility right now. ETH down actually only 7% year to date. Bitcoin has actually already bounced 26% off of its bottom from a couple hours ago. ETH is up 44% off of its bottom from a couple hours ago.

And, you know, just a friendly reminder that BTC is still up 28% year to date. ETH is still up more than 200% year to date. So if you can just take a very marginal step back here for as much downside price volatility as we're seeing right now, certainly, all is far from lost at the moment.

ZACK GUZMAN: Yeah, I mean, that's kind of the reminder there for viewers. Obviously, it's a little bit less palatable and a little bit less helpful for those who may have bought at the top here. But when you look at maybe where fair value is right now at this point in the cycle, you have JP Morgan coming out and saying that when they look at their model relative to gold, it still sits at about $35,000. Interesting to see kind of where we're holding on that level.

But when you break down kind of where we could go from here, Fundstrat also pointing out-- I mean, 40,000 was that 200-day moving average point for Bitcoin. And we're down below that now, obviously. And you look at the forward returns, only 10% when you're below that versus about 200% when you're above it. I mean, it just doesn't seem-- what's the catalyst to get you out of the down cycle that some would point to and put fault on Elon Musk for kind of triggering all this? I mean, how does that sentiment turn? Because we know that that's just how the sector trades.

TRAVIS KLING: Yeah, right. So how did we get here, right? And the market was-- Bitcoin was a little weak. It looked like some distribution above 60,000. We started heading to the bottom of the multi-month range there. And then, right then, Elon gets on Twitter and just kind of does this verbal puke thing around Bitcoin as it relates to ESG, this ESG narrative, which the mainstream media has been covering with, I would say, a one-sidedness for months now that I think people doing research understand that the ESG picture for Bitcoin mining is not nearly as one-sided. It is meaningfully more hash power is being driven by renewables. That's going to continue over time.

But when a guy like Elon comes out and does a total 180 like he did, then that just kind of sent us into this downward spiral. And then, as crypto always has a tendency to do, things just kind of get oversold to the downside. And we're kind of right in the middle of that right now. These fair value models I don't particularly prescribe to too much. You know, you could probably pick a model and have it tell you various different fair value metrics. I think it's probably more instructive to ask yourself, what is the likelihood that we just ended an entire crypto cycle?

And Bitcoin specifically, crypto broadly, has this tendency to move in four-year cycles that center around having the-- if what we just saw was a kind of broader, macro, cyclical top for Bitcoin, and then that's going to drag down the rest of the alt market, this will be one of the most odd one of those in Bitcoin history, one of the most unique tops in Bitcoin history.

And when you look at the kind of qualitative backdrop for what's going on, both crypto specifically and macro broadly, kind of global macro, I kind of struggle to see how this would be a broader cyclical top in that, say, we're not going to get back to 60,000 for 18 months or two years or three years or something longer than that. I just-- I see too much positive crypto specific things going on right now. And we're still just neck deep in the largest monetary experiment in human history. And Bitcoin is an insurance policy against that. And I don't think anything's changed too much from that perspective.

AKIKO FUJITA: So, bottom line, Travis, how do you trade on this? Do you buy on the dip, or do you expect it to fall a little more before you get in?

TRAVIS KLING: I run an investment fund for a living, so this is certainly not investment advice. If you have any kind of medium or long term sort of investment period, right now is an outstanding time to buy. Dollar cost averaging has and always will be the best way for everyday investors to get exposure to this asset class. And from time to time, Bitcoin goes down 30%, or it goes down 50%. And historically, if you've just bought a little extra relative to your dollar cost average, during periods of time like that, that strategy has served you very well. And I don't see why now would be any different.

ZACK GUZMAN: I mean, always important to stress the importance of dollar cost averaging, whether we're talking crypto, whether we're talking stocks. But Travis, send me your resume. I'll forward it over to the Yahoo Weather folks working on that. I appreciate you coming on him to chat with us today. Travis Kling, Ikigai Asset Management Founder and CEO, be well.