This technology is not just an asset class, there’s underlying technology that will transform all industries: Magnetic Co-founder
Megan Kaspar, Magnetic Managing Director and Co-Founder joins the Yahoo Finance Live to discuss 2021 crypto predictions.
Video Transcript
ZACK GUZMAN: Welcome back to "Yahoo Finance Live". This week has brought quite the recovery in the price of Bitcoin. Of course, it fell about 25% from that $40,000 level. And now it's pretty much recovered back to that level. Interesting calls here being made for where the crypto could go in 2021, including one from our next guest here, who says it could potentially see Bitcoin 200,000 at the end of 2021. For more on that, we're joined here by Megan Kaspar, managing director and co-founder at Magnetic, an asset management company exclusively focused on the digital space and blockchain-based assets.
And Megan, I mean, 200,000, a pretty big price jump from where we're at right now. So how do you see us getting there? What's the main factor in driving-- I know a lot of people are focusing in on the way that the investment community is really buying into the idea of this being the new digital gold.
MEGAN KASPAR: Hi, Zack, yeah. Well, Bitcoin has gone up quite a bit just in the last four years alone. The entire market cap of crypto was at $17 billion. And now we're at $1 trillion. So this is a big milestone for 2021. We also hit 42,000, which was at an all-time high. And with the flows of liquidity coming into crypto, specifically from institutions, insurance companies, pensions, we're going to see a continuation, or a proliferation of that, and especially when there's a lot of fear of inflation, like times that we're in now.
So it does call for a pretty good case of Bitcoin being at least 200,000. And then especially the options market, the premium on the options right now are extremely high. Whereas you would generally pay a couple hundred dollars for an auction on BTC, you're paying a couple of thousands of dollars for these options expiring in December 31, around 200,000, even 300,000. So that sentiment is pretty high.
AKIKO FUJITA: Megan, you've highlighted a number of use cases that you see for cryptocurrency as a whole in this year, specifically talking about how you think governments and businesses will be using stable coins as a cross-border payment. At the ends of all of your thesis, though, you talk about this being a $10-trillion asset class. How does that shift the way investors should be thinking about this now?
MEGAN KASPAR: I think it's similar to how investors looked at the internet 20 years ago. This technology is not just an asset class. There's an underlying technology that is going to transform all industries, starting, I think, with our financial system. And there will be right down into industries around consumer marketing and consumer products.
ZACK GUZMAN: The other interesting thing too here, Meghan, is so much attention is on Bitcoin. And of course, it's well-deserved when we think about, maybe, it being the first one that launched all the crypto movements here. But Ethereum, another one of those things that here is kind of powering some of the more technologically focused products when you think about smart contracts and everything that can be done there, how much is, maybe, being overlooked on that side of the crypto market? And what are your expectations for Ethereum in 2021?
MEGAN KASPAR: That's a great question, Zack. So Ethereum is definitely very undervalued. And I think if it breaks its all-time high of 1,400, we'll see the price of Ethereum test the mid-3,000s. There's a lot of value that's going to come out of this chain. And it's definitely being overlooked. And it's misunderstood, I think, by a lot of investors that are just getting their feet wet to understand the ecosystem as a whole.
Each coin serves an entirely different purpose, not each one to replace fiat. But especially with Ethereum, as you said, the smart contracts and the capabilities that Ethereum provide are drastic. One most specifically that's very relevant right now is decentralized social media platforms, giving everyone the ability to speak freely without being censored. It's a very powerful-- yesterday, Jack Dorsey announced his project at Bluesky potentially using Ethereum or a custom-made chain. But Bitcoin, all of the chains in general give us these capabilities that we wouldn't have otherwise.
AKIKO FUJITA: So if it is undervalued, where do you think fair value actually is? And to the point that you made about Bitcoin, if we're talking about year-end, what do you think Ethereum's going to hit by the end of the year?
MEGAN KASPAR: Year-end, I would say it will at least hit 2,500, provided that everything-- it generally follows the price of Bitcoin. So I would say around 2,500 Ethereum sounds great. But again, if we hit the all-time high, we must break the all-time high of 1,400.
ZACK GUZMAN: Yeah. There's a lot of big if's in the crypto space. And you think about how long it took for the wider investment community to wrap their heads around what Bitcoin is or the possibilities that it delivers here, where we're at, as you said, it took quite some time for people to buy into the idea of digital gold. I imagine it would be a little bit longer for people to really wrap their heads around what could be provided through Ethereum.
But when we talk about some of the catalysts for the downside risk here, it took a couple of days to see a 25% drawback. Obviously, everyone knows Bitcoin and other cryptos can be very volatile. A few of our guests have said that they could even see, perhaps, a 40% to 50% decline. That would be from Thom Lee at Fundstrat.
Once we see, maybe, some volatility hit here this year, how important is that reminder here? Because we haven't really talked a lot in a few years about hacks, the risks that we saw back a few years before even the last prior highs in Bitcoin. I mean, what are your estimations right now around security in the space and how much that's improved? Or, maybe, has it improved?
MEGAN KASPAR: Well, the Bitcoin blockchain historically, and to date, has never been hacked. So when you speak about hacks, it's wallets that are being hacked. And I think that the institutional investors that are coming in now are more educated than they were in 2017. And with every three or four years, we have these sort of cycles of growth.
More and more people are coming to this into this space. More and more people are educated and understanding on how to safely and securely store their crypto. So when you're doing that, the likelihood of a hack or even losing access to your wallets decreases drastically. There's a lot of solutions that have come into play as well, storage-wise and on exchange, so on-chain and off-chain. So I think that risk is relatively low considering years past. And it will continue to gain strength.
AKIKO FUJITA: Megan Kaspar, Magnetic managing director and co-founder. It's good to talk to you today. I appreciate your time.
MEGAN KASPAR: Thank you.
