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Why bitcoin and equities are selling off 'in tandem,' Valkyrie CEO explains

In this article:
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Valkyrie CEO Leah Wald joins Yahoo Finance Live’s Julie Hyman and Brian Sozzi to discuss the sell-off in bitcoin and the outlook for crypto.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Bitcoin is off to one of the worst starts to a year in some time with the benchmark crypto off about 8% so far in January. Is there any relief in sight for the Bulls, though? Leah Wald is the CEO of Valkyrie, which is a key player in the crypto investing space. Leah, nice to see you this morning. Look, tough month for the Bitcoin Bulls, is there something more at play here underneath the surface, besides just fears of higher interest rates impacting some of these riskier assets?

LEAH WALD: Yes, and tahnks for having me. You're right, it definitely has been tough. Bitcoin's down nearly 40% from its all time high in November. Bitcoin sold off for six straight days going back to last week, moving largely in tandem with equities. And this correlation, we think, is largely due to institutions and funds that invest in both traditional and digital assets, going risk off until this uncertainty plays out.

So though the prices did dip between $40,000 for the first time since August, they did find support and we do think that they're gaining footing. So it's now above $41,000, nearly 3% on the day, and it does appear to be consolidating, but it is still well off from the all time highs set last year. And for us that have been in Bitcoin for a while, we are used to this, so we're looking at that technical level.

JULIE HYMAN: Hey, Leah, it's Julie here. You're used to this, but not used to a Fed tightening cycle, right? I don't think Bitcoin's been around since we had a really significant tightening cycle here in the United States. So, I mean, how does one even predict what a new asset is going to do in a situation like this where liquidity is coming out of the market?

LEAH WALD: Yeah, it's unprecedented. I think you're absolutely right. From what we're seeing, traders are definitely concerned a hawkish Fed is going to raise interest rates faster than previously expected. Analysts are expecting four rate hikes this year rather than the three that were previously signaled. And rising rates, as you guys know, usually portend a risk off environment. And that usually sees bonds favored over riskier assets, like equities and definitely digital assets.

So I think you're absolutely right. This is an unprecedented environment from the pandemic to what's happening in the Fed across the board. So I think that it's especially important and prudent to watch those technical levels, and also the fundamentals of Bitcoin, which I will note actually have been strong.

BRIAN SOZZI: Leah, this this weakness we're seeing in prices and, really, I would say an uncertain outlook, does this hinder or hurt the adoption of Bitcoin amongst institutions this year?

LEAH WALD: Yeah, I think that that's a really good question. I don't think that it hinders or hurts, actually. And I think that because we have seen such strong adoption last year, but also going into the end of the year. And you do see it in a very major way from institutions, speaking and working with fund admins, and also just generally from equities.

A bright spot that people don't often think about, but Bitcoin mining stocks have been surging over the past year. As an industry, they generated over $15 billion in revenue and have largely outperformed broader indexes. Also, kind of fun side note, but they can be used as an ESG-focused socially conscious portfolio because most miners, especially in the US, are actually using renewable energy, such as solar, wind, or hydroelectric power to their rigs. So I think if we think about it in the various elements in the industry, there's definitely bright lights that can still be found that, I think, we'll keep seeing adoption in certain ways.

JULIE HYMAN: Leah, I want to talk about your ETF for a moment, the futures ETF. It was the second one on the market here in the US. It is tracked with Bitcoin, not surprisingly, and has seen a downward trend. And when you talk about adoption, you have not had the inflows into the fund, perhaps, that you might have hoped. Talk to me about that fund, about the marketing of it at this point, and about what you're hearing from people who are potentially interested.

LEAH WALD: Yeah, absolutely. So I would say that I can't specifically speak to the performance of the fund, but what I can say is that response has been positive. We're happy with how the fund is performing because we believe that being smaller than others has enabled us to have that less tracking error. And that's because we've been able to stay in front month contracts, futures contracts.

So I think that in regards to demand and inflows, we are very interested in what this quarter has to offer. Again, I think that a large, and from what we've been hearing, large money managers, large pools of wealth have been waiting to see how the different futures, ETFs have tracked, and how they've handled their roles.

So I think that this, potentially, could be the quarter where they're finally feeling more comfortable, or not, with how we've performed or others have performed, and they will see that as potentially a portfolio allocation. And it, hopefully, passes their investment committee. But we did expect it to take a little bit longer for large institutions to really start buying these futures ETFs, and not to be off the very front.

BRIAN SOZZI: Well, we appreciate you keeping it real for us. I know it's been a tough few weeks in all things crypto. Leah Wald, CEO of Valkyrie. We'll talk to you soon.