Myles Udland and Brian Sozzi of Yahoo Finance analyze Bitcoin’s decline and the prolonged drop in the ARK ETF as stock futures fall ahead of Fed Chairman Jerome Powell’s testimony to Congress.
Video transcription
MYLES UDLAND: Great story on the market yesterday is what is happening with Cathie Woods ARK Invest. They have a set of ETFs, five ETFs trading with several, ARKK is the main fund, but they have ARKW, ARKF, ARKG and ARKQ as well. All of these funds lost about 3 and 1/2% during yesterday’s trading session. There is a Bitcoin position in the ARK portfolio. They also have many of the top names in the technology that were big winners.
And the story of Cathie Wood’s success over the past two years, destroying the market based on returns, seeing AUM go from about $ 3 billion to about $ 60 billion in just a few years. Just a big player on the market, Brian Sozzi. But I think it’s interesting to see yesterday’s action. And we’ll see how much is in a series of ARK names that people are now associating these funds with. Getting specific pressure. And I think more, the clearest reason, perhaps, to say what was affecting technology stocks yesterday.
BRIAN SOZZI: Yes, Myles, let me get to that point, ARK, because I’m looking at a chart of Jefferies now, and last week they noticed the six ARK ETFs that they tracked raised $ 2.5 billion. And those six ETFs that Jefferies has tracked in the year so far, before that defeat, have seen inflows of $ 17 billion in the year so far. So ARK Invest, Cathie Wood, we covered her extensively, before anyone even knew who she was, really gained a lot of attention on Wall Street with individual investors for her performance mainly around Tesla and many of these next generation investments.
But, Myles, until today’s sale, it’s really interesting. And you have, I think, the establishment now coming here and trying to burst the bubble in Bitcoin. And of course, I know that Elon Musk showed up at the weekend. He said, in quotation marks, “Bitcoin prices look very high.” But you had Janet Yellen showing up at an event yesterday, questioning the efficiency of using Bitcoin. You have Bill Gates questioning the very existence of Bitcoin. It is not surprising.
But again, these are the types of comments when you have a lot of momentum trades and you have a momentum type investment like a Bitcoin, they are types of comments that can really burst the bubble. And that is what we are seeing, I think here this morning. And it’s not just Tesla under pressure or Bitcoin under pressure, there are many of those other moves. Nvidia under pressure. Their technology gets used to mining Bitcoin. MicroStrategy under pressure. Myles, how is the new convertible debt rising, given the defeat now? It seems absolutely absurd.
MYLES UDLAND: Yes, and I find that interesting, Sozzi, because we are talking about Bitcoin for $ 48,000. It was a month ago that Bitcoin had just broken $ 40,000. We entered 2020, 2021, it is no longer 2020. We reached 2021 with Bitcoin close to $ 20,000. We surpassed these record levels of 2017, which was the big event. So we saw the price move considerably in just a few weeks here.
And as we’ve discussed many times, Bitcoin’s story is price. I know that Bill Gates can say anything and Janet Yellen can say anything and nobody in the currency community likes those comments very much. And I don’t blame them, because the story of all these assets is that the price goes up a lot. And that brings more interest to the space. It creates situations like what is happening at MicroStrategy. This leaves someone like Elon Musk interested in putting a billion and a half dollars in Bitcoin. And interest is driven by how expensive Bitcoin is.
Obviously, for $ 48,700, there are many people who have made a lot of money and do not care that today it is below 10%. And they won’t mind another $ 15,000 if they are still interested in worrying about their investments. And so I think it’s an interesting situation, Soz, when you compare, let’s say that Apple drops 10% in one day. Everyone was freaking out. There must be a reason for this to happen. It is more difficult with the system to talk about Bitcoin because there need not necessarily be a reason for it to go up or down as much as it usually does. And that creates a very strange resource to discuss.
BRIAN SOZZI: No, you’re right, Myles. And I want to give people perhaps some positive news this morning, because, in fact, they are seeing a route in NASDAQ actions. You have seen the market under pressure, I would say, for seven consecutive days. This arrives at an IScore Evercore this morning. Dennis Debusschere notes, he quotes, “the internal components of the market are consistent with our view that the distortion of market returns is deteriorating with the increase in real rates, but the average stock will be good and cyclicals will lead.”
He notes that the S&P 500, yes, in a losing streak of several days, but cyclicals have outnumbered defensive ones by 3.2% in the past five days. So, while you are seeing this pressure concentrated on NASDAQ and Bitcoin and some of these hot money assets, at least for now, you may not be seeing something that suggests a bigger sale or a fix that might come up soon.
MYLES UDLAND: Yes, and that refers to a topic that I know we will discuss as we arrive at this year’s balance sheet, which is really, may the economy and many stocks within the market go very well, even if S&P and technology stocks, those names flying high, are they under pressure? I think the old man is, what’s bad for the FANG names is probably good for you and me, hoping to get back to real life. So interesting comments from Dennis there, and we’ll see how that theme develops for the rest of the year.