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Crypto market volatility is ‘part of the price of opportunity’: CoinShares CSO

Meltem Demirors, CoinShares Chief Strategy Officer, joins Yahoo Finance’s Kristin Myers and Alexis Christoforous to discuss outlook on crypto.

Video transcript

KRISTIN MYERS: Welcome back. Let's talk cryptocurrency now. Bitcoin is under pressure after Turkey banned using that as payment. Meanwhile, Dogecoin right now is soaring. So we're joined now by Meltem Demirors, CoinShares chief strategy officer. Meltem, thank you so much for joining us today. I want to start with that Turkey news. Now it was thought that Bitcoin was getting to a place where we would have more institutions adopting it. Curious to know if you think that Turkey and that decision there might be more of an outlier or if we might see more countries joining in as well and banning that cryptocurrency. And what could that do to Bitcoin going forward?

MELTEM DEMIRORS: Those are all great questions. I've been in this industry for seven years. CoinShares manages $5 billion in assets. So we spend a lot of time looking at what's happening around the world. I'm actually from Turkey myself. And my WhatsApp has been blowing up this week with friends and family in Turkey looking at getting into crypto.

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Let's be very clear, though. Friday's sell-off today's market sell-off had very little to do with the news of Turkey banning the use of cryptocurrencies for payment, but really more to do with the derivatives market. Ahead of the Coinbase listing on Tuesday, we saw a lot of activity in the levered trading market with a lot of traders taking on leverage to go long Bitcoin into that news. Now that the Coinbase cat is out of the bag and given how expensive the cost of debt is in the crypto space, we've seen a lot of that unwound, which has been the primary downward catalyst.

But a fun fact about Turkey, I was just speaking to my friend who runs part of the trading view business, which is one of the largest networks for investors, and this week, that site saw a massive spike of traffic from Turkey, which is now its number one source of traffic as a country. And all of that traffic is going to cryptocurrency charting and cryptocurrency discussions. So it's definitely, definitely not a dampener. I think if anything, is that it is a catalyst. And more and more people in Turkey are now looking at crypto, already the number one country in that EMEA zone in terms of crypto adoption. So I expect the story will continue to unfold.

ALEXIS CHRISTOFOROUS: We know that you can't get into crypto unless you have an iron stomach, right, because there's going to be lots of volatility here? But when do you think that might start to even out? What has to happen to sort bring that-- to reign that volatility in? And I'm thinking maybe it happens when there's finally a Bitcoin ETF, or we see more products out there that allow people to buy sort of baskets of crypto, as opposed to sort of playing in one kind of cryptocurrency versus another. What do you think?

MELTEM DEMIRORS: Yeah, absolutely and great question. CoinShares, we've been in the ETP business for the last six years. As I mentioned before, $5 billion in AUM. And our products around the world, there is over $60 billion in AUM and publicly listed crypto ETPs. And we see that number growing. One interesting fact, the last two quarters, gold products have seen $20 billion in outflows. Crypto products, record high of $7 billion in inflows. I don't know that an ETF really changes much in terms of the ability to access crypto.

Today, if you're in the US, you can access crypto directly through Square's Cash app, Robinhood, Coinbase, name your favorite fintech platform here. You can access it through a number of other platforms. You can buy products that provide exposure to Bitcoin. So it'll be interesting to see what a Bitcoin ETF really does in terms of unlocking additional demand. What I think is more interesting per your question on volatility is, at our firm, we firmly believe that Bitcoin's volatility and the overall volatility of the crypto market is part of the price of opportunity.

Historically, we've seen these two to three-year cycles play out in the crypto space. And right now, obviously, we're in an up cycle. But by the way, cryptocurrency volatility is nothing compared to traditional equity markets. Over the last 12 months certainly, you know, it used to be that Bitcoin was crazy volatile. In the last year, Tesla's stock has been twice as volatile as Bitcoin. And equities across the board have been extremely volatile. So as the rest of the market becomes more volatile, I think Bitcoin's relative volatility becomes less of a concern.

The real question here is, can you achieve real diversification through buying a basket of crypto assets or crypto products or even companies like Coinbase? Because so much of the revenue in this space is still tied to the market cap of these coins. And a lot of crypto assets still do have a beta of 1 or a high correlation to Bitcoin's price movement. Bitcoin still comprises over 55% of the crypto market cap. Ethereum, the second largest digital asset, is over 13%. So the real question is, is, at what point will we see correlation come down and see increased diversification within the sector itself?

KRISTIN MYERS: Meltem, we had so many more questions that we were hoping to get to with you. So we're just going to have to have you back on in the future. I know we're going to be chatting a lot more about crypto going forward. Meltem Demirors, CoinShares chief strategy officer, thanks so much for joining us.