Bitcoin is an antidote to dysfunction: Demirors

CoinShares’ Chief Strategy Officer, Meltem Demirors, joins Yahoo Finance Live to discuss Bitcoin’s recent pricing action, its outlook for cryptocurrencies, and why it believes’ Bitcoin is a counter-to-malfunction ‘that can be added to portfolios.

Video Transcript

MYLES UDLAND: Alright, let’s direct our conversation now to what we’ve been following last month. It’s really been exciting where we’ve been kind of gravitating towards finally getting stimulated. A lot has happened in the crypto space, some news this morning regarding Ripple and seeing some concerns there about whether it’s true security. And we’ll get into that a little bit. We see Bitcoin up about 3%, trading around $ 23,500 or more.

And join us now to talk more about everything happening in the crypto space is Meltem Demirors. She is the chief strategy officer at CoinShares. Meltem, great to talk to you this morning. Let’s start with the question I have to ask all our crypto guests, namely, why is 2020 so different than 2017? And kind of how have your conversations changed in the last two years?

MELTEM DEMOLITIONERS: That is the question we often get. And thanks for getting me on. It’s always a pleasure to be here with you and with Julie. So, look, what’s different this year is this. 2017 in many ways felt like 1999. In 1999, people didn’t know if they were buying or It was a very wild, wet time, and I think 2017 was for many of us feeling the same way – lots of coins, lots of names, a lot of capital flying around.

This cycle is so different because the narrative is very focused on Bitcoin. We see big investment banks. We see central bank governors talking about Bitcoin. Guggenheim’s CIO came out last week and said his price target for Bitcoin is 400K. Ruffer Investments is putting a billion dollars into cryptocurrency.

We have MassMutual in the US adding Bitcoin to its overall balance sheet. This is an insurance company that is regulated and governed using very high standards of risk strategy and allocation. So the world looks and feels very different. Talking about Bitcoin is the same as you know, investors talk about other allocations.

And at the end of the day, the climate has just completely shifted. I think your last guest, Greg, said that perfectly. The last nine months in this country, in our economy and our markets, have been dysfunctional. And Bitcoin is an antidote to a malfunction that you can buy in your portfolio. [LAUGHS]

JULIE HYMAN: Hey, Meltem. It’s great to talk to you. I always like the way you explain Bitcoin for people who aren’t kind of immersed in the crypto world. I would – you know, you were talking about not only why 2020 is different from 2017 but why it’s different from 2018 and 2019. You know, the world around us is very different.

And a lot of people have been telling us that, oh, organizations are getting involved now in Bitcoin. I guess I’m still having trouble understanding why. Is it just a matter of diversification for them? Is he chasing a price? I mean, what – what has changed, you know, in terms of organizations thinking about crypto?

MELTEM DEMOLITIONERS: Yes, that’s a great question, Julie. And always such a pleasure to chat with you too. So here’s what I find really interesting about 2020. And you set it up perfectly. Everything in investment and the world of markets is relative. The biggest conversation I would have with investors in 2016, ’17, ’18, ’19, there was a lot of talk about volatility.

Historically, Bitcoin, relative to markets and the options investors had, has felt volatile. But this year, Bitcoin volatility is always at its lows, and the rest of the world, other asset classes, other markets, have become more volatile. I was just running the numbers. Tesla, this year alone, is up 655%. Bitcoin up 226%.

So in terms of the universe of options, in terms of the universe of investments that people may be making right now, $ 5 trillion of dry powder sits on the sidelines. So what are people going to buy? Things are overvalued. Tech is an over-thought, right? The valuations are skyrocketing. Things are trading on your PE multiples forward 2025, right?

Multiple 2,500 PE, that’s not normal. People may not necessarily want to allocate their money there. And so I think Bitcoin has become much more attractive as the world around us is changing and the options that distributors have are changing.

And we see this not only with Bitcoin, right? We look at house prices, always highs. People buy property. People buy land. Art auctions, always highlights. Collectibles always trading at highlights. People are looking for places to put cash in a zero interest rate environment.

And they think about the long-term impact of taxes. Bitcoin is a great asset that someone can buy and hold in the long run, right? We love using the term “hodl,” but it’s a great place for people to be allocating it when thinking about long-term value creation and long-term growth opportunities.

So I think that the world around us has changed has been very important for changing the perception that people have of Bitcoin, especially investors and investment committees who look around and say, wait a minute. How are we going to reach target return rates in an environment where we can’t buy treasures? Fixed income is basically on ice, right? They need to start thinking outside the box.

And I think Bitcoin is here. Markets are more fluid than ever. Options markets are very robust. Ways to access Bitcoin are more, you know, diverse than ever. We have $ 2 billion in assets under management just in our exchange traded products. So much more is available. There is also a lot more capacity for the industry to absorb those inflows.

ZACK GUZMAN: Why do you think – why shouldn’t Ripple– let’s change gears to Ripple. Why should Ripple–


ZACK GUZMAN: – classified as security? Ripple is coming on fire today, possibly from the SEC, saying he violates investor protection laws. At the heart of the debate is, should it be considered currency or security? Where do you stand?

MELTEM DEMOLITIONERS: Yeah, so my point of view is very clear and simple. You know, I’m not a policy maker. I’m not a judge. I’m not a jury. I’m not an executioner. What I think we’ve seen – and we’re dealing with regulators in the US, Europe, and other jurisdictions. At the end of the day, I think the issue in the US is that we’ve seen very inconsistent enforcement here in the US.

It feels right to us as the industry that the regulators of this country choose winners and losers, and that’s not really the role of a financial regulator. I don’t want to make too much of the wealth statement that came out of Ripple this morning regarding this SEC case. But at the end of the day, you know, what I’ve held for a long time and what I’ve witnessed before Congress last year is Bitcoin is fundamentally different from every other cryptocurrency.

Bitcoin is not like anything else. The way Bitcoin was created, the long distribution cycle, the fact that it has been in the market for 12 years, there is no Bitcoin CEO you can call. You know, if you wanted to file a lawsuit against Bitcoin, you couldn’t even begin to do that because there’s no single entity that manages Bitcoin.

Ripple is very different. It has a CEO. He has a US-affiliated company. So we’ll watch him play out just like everyone else. But I have no other comments except, you know, I wish we had more regulatory clarity so that people could act in a compliant way.

I really don’t think anyone in the industry, you know, wants to be non-compliant. I think the big challenge is really, this is new. It does not fit cleanly into one particular agency or area of ​​supervision. And I’d love to see more dialogue between industry and policy makers so we can–


MELTEM DEMOLITIONERS: – formulate rules. Mm-hm.

JULIE HYMAN: Sorry, in that, very quickly, I want to ask if you, in this new administration, are expecting more consistency and communication.

MELTEM DEMOLITIONERS: I am not sure. In fact, some of the initial bills that we saw – two weeks ago, Rashida Tlaib and some House Democrats came out with a bill called the STABLE Act that I felt was very worrying. You know, the Biden administration will have a lot of Goldman bankers and BlackRock executives as part of it.

I think what we’re seeing is a battle between the cryptocurrency world and the legacy finance world. And so the fact that this administration is filled with legacy finance people who, you know, directly oversaw what happened in 2008, to disastrous consequences, and are now directly involved in the biggest process of introducing power into modern history, including in the financial sector. , you know, not encouraging me.

But we’ll have to see what happens. We’re going to be here fighting the good fight, though.

MYLES UDLAND: Okay. Meltem Demirors is the chief strategy officer at CoinShares. Meltem, great to get your thoughts this morning. Thanks so much for joining. Next time we talk, it will be 2021, so we can talk about why it’s different than 2018, maybe–


MYLES UDLAND: –if we don’t see the kind of sell-off–

MELTEM DEMOLITIONERS: – what? I want to drop one more fact. $ 1,200 stimulus check, if you put it in Bitcoin, you would have $ 4,200 right now. So Bitcoin may be our sweetest test for 2021.

MYLES UDLAND: And I think you and I know that many of those $ 600 checks are likely to find their way into Bitcoin as well. We’ll see how that plays out in the months ahead.

Alright, Meltem Demirors, thank you so much for joining us.