With Cryptocurrency prices on the rise of late.
You may be wondering what's behind the rally. How long could it last?
And how high could it go?
So, to help us understand, joined by Matt Hogan,
chief Investment Officer at Bit wise Asset Management.
I Matt, welcome to the show.
Thanks for having me, Kristen. Delighted to be here. We're happy to have you.
What's behind this recent rally in Cryptocurrency?
This rally is first and foremost about the prospects of a spot Bitcoin ETF launching
sometime in the next few months.
Bloomberg analyst assign a 90% likelihood that we'll see
a spot Bitcoin ETF launch by January 2024 and
that would be transformative for this asset class really
moving it from a niche idea into the mainstream.
We think it'll bring tens of billions of dollars into crypto
and we think it may push crypto prices to a new all time high if and when it occurs.
So it's a very exciting time. There are other important drivers of this rally.
It's not just about a spot
Bitcoin,
but that is a big deal. And as I said, Bloomberg thinks it's likely to happen
interesting. So what key things Matt do.
Everyday Americans need to know if they
are interested in getting into Cryptocurrency.
Absolutely.
First and foremost, is even though I'm extremely bullish,
it is still extremely risky.
This is probably the most volatile asset you can invest in.
It has big up moves and big down moves.
So if you do decide to allocate,
make sure you only allocate as much as you can afford to lose, it is still volatile.
But the other thing is that crypto has evolved,
many people maybe first heard of Crypto
five or 10 years ago when it was really a niche fringe idea.
Now you have the largest asset managers in the world
talking about Bitcoin as a flight to quality asset.
In other words, something people buy when the rest of the market is having trouble,
that's a sea change.
So the narrative has changed around crypto.
I love that social media poll.
It sounds like your viewers are ahead of most professional investors.
That's great.
But it is moving into the mainstream and that's really exciting.
So our viewers might be wondering what exactly is a spot, Bitcoin
ETF and how would they go about investing in it?
Absolutely.
You know, ETF S are the primary way most people invest in the market today.
If you want to buy the S and P 500 you buy an ETF called Spy.
If you want to buy gold, you buy an ETF called GLD.
It's a way to package up investment exposure in a safe secure format and let you buy
it in the same way that you might buy
apple stock just in your traditional brokerage account.
So a spot Bitcoin ETF is just that
investment managers like bit wise and others hope to take bit,
hold it with the custodian.
And then let you buy exposure to that in the same way
you would buy Microsoft or Tesla or Apple or any other security.
And that's what we hope to bring to market in the next few months.
And that's what's been missing from the market for the last 10 years.
What's the timeline here? The investing horizon
and how high I know you mentioned potentially an all time high?
We could see Bitcoin reach. How high would that be? What is the all time high?
Yeah, the all time high is around $68,000 currently trading around $35,000.
So we think there's significant
upside appreciation, but it is important to note
a we're not certain that a Bitcoin ETF will be approved.
No one can guarantee that b it's still a very risky asset class.
So there's no guarantee on price targets.
And see most importantly,
what you spoke about in terms of time horizon is really the critical matter
I mentioned earlier that Bitcoin is very volatile.
If you look at it historically over the last 10 years,
it's been a phenomenal investment,
but there are plenty of periods of time where you could
have lost money where it pulled back 3040 50% or more.
So, people investing in Bitcoin should most likely in my view,
have a multiyear time horizon.
And if that's where you're investing, I think it's pretty attractive.
So why should someone consider a spot Bitcoin ETF
map versus just investing in the Cryptocurrency outright?
Yeah, both are great options. The advantage of a spot, Bitcoin ETF is it's easy
and it's really secure.
Instead of holding crypto on your phone,
you can hold it in your brokerage account and an institutional uh
manager can work with custodians to make sure the Bitcoin is secure.
Now, people can absolutely buy Bitcoin on their own love that.
But I think for many people buying a spot, Bitcoin ETF will be easier,
cheaper and more secure.
Ok.
So knowing that it is volatile,
but you do think we could reach a new all time high on Bitcoin.
Do you think now is a good time for people to get into the Cryptocurrency market?
You know,
sometimes I like to keep things simple and
Bitcoin's price is driven by supply and demand.
As we look out over the next six months,
we see a major new source of demand from people moving into an ETF and
we see reduced supply because Bitcoin is going through its once every four year hal
where the amount of new Bitcoin being created falls in half
more demand less supply.
I think that makes it attractive. It's not a guarantee,
but I do think now is an interesting time to be looking at this space.
So, in a flight to safety, historically,
investors have usually gone to commodities like gold.
For instance,
when we see geopolitical issues heating up around the world,
multiple wars going on.
Certainly,
as the world is well aware of how is Bitcoin different than a
commodity like gold when it comes to a flight to safety trade.
Yeah, it's very similar in many ways.
The reason people go to gold is it's a reliable,
scarce commodity and governments can't print more of it or
distribute it or inflate it away or degrade it.
So people migrate into those assets.
The same thing is true in Bitcoin, we know there will only ever be 21 million Bitcoin.
So the same scarcity and a government protection that attracts people to gold
is attracting people to Bitcoin.
The difference is it's more volatile, it's more risky,
it has more upside but also more downside.
But it has many of those characteristics.
Some people have referred to it as digital,
digital gold or aspiring to be digital gold.
I think that's a reasonable way to think about it in a portfolio.
So not as traditional as gold, more volatile but maybe more interesting.
Interesting.
I I am interested indeed. I think people are interested as well that
before we have to let you go, let's just leave our viewers
with this to think about the risks of investing in the Cryptocurrency market.
I know you mentioned earlier that it is volatile.
It can be a way to diversify your portfolio. What should investors know
if they do decide to make the move?
Yeah,
the the first thing to know is to have
the behavioral strength to hold through thick and thin.
Again, this is a long term investment. It's going to go up and down a lot.
So you'll be tested during those down periods and those up periods,
you can't get too excited.
But there are other risks as well.
There are regulatory risks, there are legislative risks,
there are technology risks.
This is not a risk free trade,
but investors sometimes are compensated for taking risk and it is the best
performing asset in the world over the last 13 and five years.
So we think it's an attractive setup.
Beware of the risks and size your portfolio appropriately for that.
All right, Matt Hogan, Chief Investment Officer at Bit wise, Matt. Thank you.