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Tune to today’s episode of “Markets Daily” for a minute of market news followed by an interview with Banríon Capital Chief Investment Strategist Victoria Bills on how financial advisers might speak with their clients about bitcoin and crypto assets in 2024.
This episode was hosted by Jennifer Sanasie. “Markets Daily” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl, alongside Senior Booking Producer Melissa Montañez. All original music by Doc Blust and Colin Mealey.
Audio Transcript: This transcript has not been edited and may contain errors.
JENNIFER SANASIE:
It’s Tuesday, January 16th, 2024 and this is “Markets Daily” from CoinDesk. I’m your host Jenn Sanasie and let’s take a look at those prices. According to CoinDesk Indices, at 8 a.m. Eastern time, bitcoin was trading up 1% over the past 24 hours at $43,086. Bitcoin has come under pressure since spot bitcoin ETFs began trading in the U.S. last Thursday, as the approval turned out to be a “sell the news” event. According to Kaiko, the selling pressure was concentrated on exchanges Binance, OKX and Upbit. Meanwhile, ether rose just 0.2% over the same time period, at $2,544. According to CoinDesk Indices, ether was the only member of the six largest assets by market cap to have positive returns over the past week. Today’s ‘Mover’ in the CoinDesk Market Index is Blur, ticker BLUR, up 20% on the day. In traditional markets, the return from the long holiday weekend in the U.S. has stock futures dropping, pointing to a cold opening this morning. On Monday, both the S&P 500 and NASDAQ traded nearly flat. And in commodities, both oil and gold rose amid geopolitical tensions in the Middle East, with the Brent crude benchmark trading at 78 dollars and 68 cents a barrel and gold at $2,038 dollars an ounce. For more on the markets action, let’s bring in Banrion Capital Management chief investment strategist Victoria Bills. Now we have a long weekend here in the United States. It’s Tuesday morning, tell us, what were you watching over the weekend?
VICTORIA BILLS:
So I actually was watching a lot of the news and trade volume that was happening around the spot bitcoin ETFs. I’m sure a lot of the audience, or a lot of our crowd today, was very familiar with the massive surge of folks who were interested or who were trading these products over the weekend. So it was interesting to kind of see once the ETPs got approved, just kind of who came out as the main winner in terms of trade volume. A lot of folks were betting on Fidelity and BlackRock to be kind of the mainstay where people are going to go. But it was surprising to see that Bitwise actually had a very good trading day and actually came out on top in terms of the one everybody was looking at, they had the largest trade volume of all of the 11 ETPs that were approved over the week. So it was interesting to kind of just see how that was operating. And then the other part of it was prices overall for bitcoin dropping during that time, because my expectation was the prices were going to rise. But of course, that’s the expectation. Now that I realized in terms of people who are looking to basically cash out from this large surge of news and opportunity that was in the market during the week.
JENNIFER SANASIE:
Victoria, you weren’t the only one that was expecting the price to rise on the approval of a spot bitcoin ETF. I think what a lot of us were surprised about was that ether really rallied and it really soared. I mentioned that as we’re taking a look at the markets. What does that tell you? How are your clients looking at ether as we head into 2024?
VICTORIA BILLS:
So a lot of our clients in terms of what we do at boundary and capital, we operate as an alternative access platform for alternative investment products for financial advisors and their clients. So when we talk to financial advisors about what are sort of the hiccups or some of the things that have prevented them from getting into the altcoin or cryptocurrency space, a lot of it has been has chalked up to accessibility, but also lack of regulation with the approval so to speak of the like spot bitcoin ETFs. There’s high concentration, I think, or high probability that there’s going to be further approval for spot ether ETFs. And so a lot of folks, I think, are trying to capitalize again on that sort of hyped news that we saw around bitcoin in order to kind of just up the price as much as possible. And then as soon as again, we see a broad band approval or adoption of like a spot ether ETF, then we’ll probably see again, that sell off that happens where folks are kind of like ‘Alright, now I’m trying to cash in on that profit,’ so to speak that we’re seeing from from that large adoption that’s going to happen in the market space.
JENNIFER SANASIE:
It’s interesting you say that, you know, bitcoin really outperformed other top cryptos last year. And the story is kind of flipped after this ETF, it looks like ether is outperforming bitcoin and may continue to for 2024. When you look at what’s happening in the markets this morning over the weekend for the duration of 2024. How are you thinking about allocating a portfolio?
VICTORIA BILLS:
So if I’m thinking about allocating to a portfolio, and if I, for example, have a client that is interested in getting involved in cryptocurrencies, we’re always considering pricing in terms of trying to who is kind of the leader or who is kind of like the like, edge case of like, who takes advantage, because when it comes to the offering of like a spot bitcoin ETF outside of just who exactly is the who’s the custodian, and who’s the person in charge of the fund overall, which is, again, I think, why I’m more excited about Bitwise, that be kind of taking being the leader because they’ve been such an advocate for crypto since 2017. And they work very well with financial advisors. If you’re also looking for example, ARK Invest is also offering a low fee. BlackRock is also offering a pretty low fee. But when it comes down to who actually is a leader in crypto and who actually is someone who perhaps is not capitalizing on the opportunity, but is more educated on how to spot bitcoin and how spot eth may, for example, work, I think that Bitwise is kind of one of the leaders in the space. Again, if you have again a client who is more savvy, investing directly into bitcoin, and that’s something as an opportunity, then I think that there’s space for that, in terms of other additional altcoins or spaces that I’m looking at. Of course, ether is actually I would say my favorite. And that’s because of just the way the productivity workflow works. Also, just in terms of the coding behind it, and I would say that there’s like a fundamental technology behind it that just makes it very unique to bitcoin, and not as too much of a commodity but as like an underlying investment itself. Again, if you have a client that is savvy and basically understands how to kind of do hot and cold storage before we see a more accessible ETF coming onto the market, and then I would say like going again and trying to purchase some of these coins while the price is still relatively low. And while there’s kind of not as much I would say hypermarket marketing that’s coming into the space is always the best opportunity. But I think this is the year for altcoins. Honestly.
JENNIFER SANASIE:
There is a bit of an ETF race going on. You mentioned Bitwise as a standout ETF provider, but you know Grayscale and BlackRock could be seen to have a little bit of a competitive advantage, Blackrock with the name, Grayscale with the assets under management that they already had coming into this race. Who do you think will win the ETF race? Because if we’re basing it just on fees, Franklin Templeton has the lowest fees? Do you think the fee race is going to be one to the bottom? Or who do you think’s going to be a standout performer, let’s say a year from now?
VICTORIA BILLS:
I think again, where we’ll see standout performers happening are the folks that I think are more attuned to what’s going on in the crypto space. If we’re talking about BlackRock, like, again, that is a name brand that is historic in the ETF space, they’ve basically capitalized on a lot of the opportunity in terms of early ETF adoption in the mutual fund space, and cannibalized a lot of those funds in a way. And then now they’re kind of putting their eyes on what’s happening with bitcoin. So I would argue that yes, they are definitely very savvy, and they have a name brand behind them when it comes to ETFs. And like knowing exactly what they’re doing. But when it comes to what happens in bitcoin markets, or cryptocurrency markets, I would say that this is where Bitwise, for example, has that advantage, they’ve been working directly in terms of providing education on alternative assets, such as bitcoin since 2017. This has been something that they’ve been providing or advocating for large market adoption from since that time and even earlier than that. And so for me, I think that where I would always want to put my money is someplace where I believe that the person is educated or the manager is educated in the space, and therefore can help provide that more historical understanding and kind of helping to hold the hand of the people who are involved and especially in the financial advisory world. These are people who are not traditionally savvy about crypto. And so even though BlackRock has the big name overall, I think that where we’re looking at in terms of like financial advisor, the financial advisor space is very much trying to help people understand this asset on a much more holistic view, and then also helping them to get that accessibility and ease on top of having that much lower fee.
JENNIFER SANASIE:
I want to zoom out now. I asked you what you’re watching over the weekend. And if you look at what’s going on at a macro level, Donald Trump secured to win in the first 2024 Republican presidential contest in Iowa yesterday and Congress recently managed to agree to a stopgap spending bill to keep the government funded, at least into March. Talk to us about how you’re watching macro events and what investors should be looking at.
VICTORIA BILLS:
So, Donald Trump securing the win I, I am partially not surprised. But I also think if this is a repeat, potentially, of 2020, we’ll see what happens. So if I’m looking at things from a macro perspective, the government not shutting down in March is an excellent thing. I think also just given what’s happening, and this is a, this is a campaign year. And then other things that are happening right now, my main concerns and markets are much more around this much more around inflation, CPI. And in general, what’s going on in terms of credit card spending. So I just saw a report earlier this week about that credit card holders are about 34%, we’re seeing an increase in default rates for credit card users. I’m also noticing that again, like consumer spending continues to go up and up despite what the Fed is doing with increased interest rates. So if we’re having this kind of like high inflationary environment on top of people continuing to spend, kind of akin that to a lot of households kind of treating credit cards or treating debt, like, basically Keynesian economics, like we continue to spend, continue to spend, the market will reset itself, or I don’t worry about things, I think that there does come a time or a limit where people are going to eventually start showing that pull back. And hopefully it won’t get to critical mass, but it’s definitely something that I’ve been monitoring over the past few months.
JENNIFER SANASIE:
And what does that mean for investors?
VICTORIA BILLS:
What this means for investors overall. So if we, for example, continue to see high high numbers in terms of CPI, so consumer spending, then what’s going to happen is that while the markets themselves have factored in for six rate cuts over this year, the Fed is most likely again, if that CPI number continues to remain strong and impact inflation, what we’ll see is the Fed will most likely not do any rate cuts this year, or if they do, it’s going to be much later into the year which by then I think it will be much too late in terms of affecting actual inflationary prices. And so what you’re going to see is kind of this overarching trickle, like trickle over effect where people are continuing to spend, they’re continuing to purchase items at a higher rate. But how the Fed will interact with that is essentially increasing rates potentially, which is exactly what the market does not want. Or, again, they decide to hold rather than cutting rates, which is again, what the market has decided to factor in. And that’s going to really downplay or really kind of suppress a lot of prices in terms of stocks, and in terms of what’s happening in the S&P and NASDAQ. So it’s going to have this very much like push down effect on on markets overall, where we’re just again, the Fed has one idea of how the economy is supposed to work, the and then the United States, the people of the United States very much are acting in opposite or in contrast of how these traditional econometric models have been working. So it’ll be interesting to see how that plays out, or the thought experiment behind it for me.
JENNIFER SANASIE:
And lastly, if that scenario does play out how you’ve just described it, do you anticipate it affecting the price of bitcoin? Or do you anticipate bitcoin early acting as a hedge against inflation? That was definitely a big narrative when it comes to bitcoin, or do you think it’s going to follow their risk assets?
VICTORIA BILLS:
Oh, absolutely. I think it will continue to be a hedge against what happens in the U.S. and in the U.S. markets. Traditionally, I think we’ve talked about this a couple of times. Bitcoin tends to react in a reverse correlation to what happens in the U.S. market. So if we’re having continuing to see pressures in terms of inflation, or if we’re continuing to kind of see like, again, those high CPI numbers, which will then impact inflation, we’ll probably see more inflows are kind of more people trying to again seek alternatives outside of the outside of stocks and bonds and try to diversify their portfolios. So we’re also kind of seeing that right now in the space where people are looking at for again, crypto currencies or altcoins. People are also looking into other alternative assets such as REITs, or even different types of investment trusts. So we’ll see a runaway from traditional markets and going more into the alternative markets in the next coming years if that scenario plays out.
JENNIFER SANASIE:
Victoria, thanks so much for joining “Markets Daily” today. That was Banrion Capital Management’s Chief Investment Strategist Victoria Bills. Thank you for listening. That’s it for today’s show.
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