Why Crypto Is Losing the Momentum Trade to AI Stocks Right Now

Transcript

enthusiasm for crypto is still I think it's it's muted from what I can tell. Uh I mean implied volatility just hit a nine-month low for Bitcoin. Uh we're not seeing a lot I'm not seeing a lot of positioning for um for sort of like convex movements one way or another. And I'd love to get your thoughts on what you're seeing. Yeah, I mean crypto has been crypto to a certain extent. The the simplest answer would be crypto's been dull compared to tech stocks. you know, I I think I think to a certain extent there there's a there's a you know, if you had to draw a vin diagram between, you know, crypto crypto enthusiasts and tech investing enthusiasts, tech traders, um there's

probably a pretty big overlap between those between those two circles. Um and so you know and and and momentum based trading or momentum based investing has been a huge feature of recent markets. And so quite frankly compare if if you're look you know if you're looking at your portfolio and saying okay my cryptos eh it's not doing much um you know and and tried to rally let's call from 65 I'll use Bitcoin from 65 to 80 and that didn't really pan out and meanwhile I I bought I bought uh you know micronu micron technologies and that's up however many zillion percent

um where am I going to want to go with it? Um and I think that that's a big that's a big issue. I also do think that looking down the road um if I were going to, you know, look for excess liquidity um to invest in some of the IPOs that we discussed earlier. Again, I would think that the that many of the people who would be thinking about investing in those IPOs um at least from the individual side, not from the institutional side. Um would would be people who might view their crypto positions as something that they could sell to buy those IPOs. Not advocating for it, but I think these are

these are pressures that I think crypto is facing. Um, you know, also now the other feature is, um, you know, let's go back to the digital gold argument. um which you know we could that's a whole other topic for debate but um real gold the yellow stuff isn't exactly ripping ahead either because it these are it for the most part unless you're in doing some ra you know relatively sophisticated stuff with with crypto um these are non-interest bearing assets and interest interest rates have as we just discussed have gone up substantially and so when you have a situation where um

you know where nominal rates and and you know the money market rates that you were referring to have increased substantially um and you're holding a non-interestbearing set of assets. Um that's not that that's not necessarily a favorable backdrop, you know. So I think that's kind of why um we've seen crypto sort of get a little left behind. Um they're they're it it's it's not the sexy flavor of the month right now.

>> Yeah, >> tech stocks are and and and and I think it's suffering as a result of it. >> Yeah, it's making me think of of a couple of different uh I guess a couple of different things. It it's an interesting juxosition. I mean going back to some of the AI related um IPOs that are coming down the pike in the next few months, etc. And then you think about I mean one of my former employers Kraken um reportedly they've delayed their own IPO. I think Ledger is another one that's that's delayed it u citing I think like market conditions uh granted there's different market conditions for for SpaceX and OpenAI and Anthropic but you could also make the argument um that they're almost they're so big and they're almost immune to any

market conditions at at this point right now because there's going to be so much demand. So it's it's interesting there. And then um I mean billions of dollars in outflows from from crypto ETFs and I I think I saw something might have been FT today forgetting the ticker but u I think it was like one like hyperfocused AI ETF like Micron and like only like two or three other stocks um beat Fidelity beat one of Fidelity's like cryptoreated ETFs um to like over 10 billion >> DRAM which is the Roundill memory ETF um depending how you measure it It either it either became the the the the most successful IP ETF launch in history out uh surpassing IBIT or or you know or

or was neck and neck. It depends how you measure it. Depends how you measure it. But bottom line is um you know crypto got that was a huge boom for crypto. I mean, you had sort of the perfect storm uh between um easy accessibility via ETFs um and um and an administration that essentially was outwardly touting the benefits of crypto. That that was as good of a scenario as you can come up with. The downside of that ETF adoption is I I think I termed it as, you know, normies own crypto now, too. Um and and it hit me when I uh was invited to speak at a crypto conference here in

Connecticut and I looked around the room and I was around the average age. I thought I was going to be like, you know, grandpa going in going in there and it was and it was a lot of people um who'd gotten into crypto via the ETFs. The the the good thing at the time was that led to huge inflows and obviously price increases. >> Yeah. bad news now is to a certain extent they're crypto tourists. Um they they can then say you know what I bought you know I bought you know insert name of crypto ET ETF or ET you know ETP here um I bought this it did well for a while and now it's not or I bought it at the

highs and it kind of I I I mistimed it completely. um you know, let me move to some let me move to something else. You know, that if if these pe if it if it was bought by performance chasers in the first place, um it's going to be sold by performance chasers as something else outperforms it. And that's not >> that's not me taking a view one way or the other on crypto as a long-term investment, but that's just that I I do think that is a very important consideration. you you can't discount you can't dismiss the importance of money flow and for better or worse um you know the the the the huge success of

of crypto ETFs was such a boon on the way up uh but now this is the you know the the the flip side of that trade I'm not attributing it's specifically to that but it it to many investors now it's one more sector among their speculative momentum based um investments and also think by the way of the popularity of some >> uh companies like and NBIS which have largely changed from uh they basically changed a business model from data centers you know from from mining models to AI data centers >> yeah computing towers uh you know also I'm not going to say fully fungeible but

it's migrating >> yeah and uh I didn't mean to interrupt you but we've done um entire shows on on that on that transition I had um I think John Tedaro from from Needam I don't know if you know him um he walked me through I mean the economics of that and uh yeah and I mean it makes perfect sense I mean you're you're you're buying an asset that you're you're producing an asset in Bitcoin that from their point of view it's not moving up um exponentially anymore it's getting uh hash rate keeps going up it's more competitive it's more expensive to mine or you can go like turn yourself into some sort of like hyperscaler get a 10-year contract from Google for an ungodly sum of money. Like, what are you gonna do? I I certainly get that. Uh but it it does it makes me think all this I

understand the points of view you're saying here and uh again, none of this is financial advice, but it does also I think this could have a good a cleansing effect for for Bitcoin. I mean we in crypto in general we've spoken about um I say like me like on other guests on the show uh there's a lot of other there's a lot more competition for that sort of like highly risk on money like there's prediction markets there's AI stocks there's there's lots of other places not just altcoins and um in certain ways I I think you almost need to have um some more uh you need to have a real sense of purpose when you invest in crypto today because it's not the sexy thing to I mean, people on this show will know it means it's you're um there's a common

saying you're not really a crypto person until you've seen your net worth drop by 90% and then have it go up like 300% thereafter. That normally, as you said, they may not have the stomach for it, but it's happened to me multiple times and and and plenty of longtime listeners, you just once you get through it once, like you're like you're you're hardened, but uh it looks really scary on the way down. And I I think sometimes that that comes it makes me think of like a like Howard Marx or or Warren Buffett in the sense that like you have to really uh put your money in when everyone else is bearish. I mean Howard Marx did it um in the distressed credit space and and he made a fortune fortune out of it. uh Black Rockck, I mean they launched their ETFs in um I mean they

filed for them during a during a crypto winter when uh Gary Gendler was still SEC chair. So I mean it was not a popular thing to do and and they did it um in the against the backdrop of a highly crypto skeptical regulator. So, we'll have to kind of see what what what happens, but um certainly there's a lot more competition for the money that would just automatically go into crypto and I think some of those ETF flu that we spoke about encapsulates it perfectly. Uh so, we are just about time although I know we probably could go for another 45 minutes or so. So, I just want to ask you um like one or two quick closing questions. We we talked about a lot today. uh inflation, gold, we even

get to what's happening with the rising dollar and and the flattening yield curve, um sort of the divergence between equities and um and kind of like like geopolitical uh I guess uh uncertainty. What is like the one thing that you're really going to be watching over the next few weeks? Um I I think number one it uh right now is you know I alluded to it at the top of the show is how does the stock market react if we get a peace deal? I mean if we don't we just sort of muddle along again and at some point at some point traders get tired of it. But I think the question the to me the number one question that was that really jumped out at me today is and and I don't have I

wish I had an easier answer is are we in a you know are we to buy the rumor sell the news scenario whereas a peace deal gets is a negative or is it just you know or market or markets not reacting better today because they're sort of skeptical of it which means they can rally further. If you've been loving Bits and Bibs, don't forget that the show is transitioning to its own feats on X, YouTube, and your favorite podcast player. If you're not already subscribed to Bits and Bips on its own channels, go there now and hit that subscribe button so you can keep up with our twice weekly live streams and macro meets crypto breakdowns. Bits andB will only be on the Unchained feed for a few more weeks, so subscribe today to be ready for launch. You can get all the links at

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