Bitcoin price volatility due to ‘lack of a ballast’ amid macro moves, strategist says

Steve Kurz, Head of Asset Management at Galaxy Digital, joins Yahoo Finance Live to discuss bitcoin dropping below $40,000, volatility, the sell-off in crypto, and tapping Blackstone executive Bill Burt as Chief Operating Officer of Galaxy’s asset management division.

Video Transcript

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- The global crypto market. That has been in decline down 10% over the past 24 hours. You're taking a look at Bitcoin, BTC-USD. On the day, down by about 10%, and over the past two days, 7 and 1/2%. Bitcoin and Ether have seen high volatility throughout January, despite continued pushes by social media companies towards NFT assets and metaverse transactions, partnerships this week.

For more on the outlook from here, we're joined by Steve Kurz, who is the Galaxy Digital Head of Digital Asset Management. Joining us now, we've also got Yahoo Finance's own David Hollerith joining us once again. And so Steve, let's dive right in. On the action that we've seen over the course of this past week, what do you believe is really at play here? And what does this set up kind of going into what is a heavy development environment for applications on the blockchain, but more specifically, kind of the annexation

of the cryptocurrencies we've been tracking?

STEVE KURZ: Yeah, thanks so much for having me. Look, it's pretty normal for crypto to have volatility like this, particularly to the downside. I think what's different, obviously, and as a student of markets you have to respect what's going on with the Fed and in the interest rate market with inflation numbers. And so I think everyone in the crypto market is looking to, you know, Jerome Powell and I think some of the softness that we've seen in crypto probably continues.

There's a real lack of ballast or anchor point to something like a Bitcoin price when you see these kinds of moves happening in the macro markets. So I don't think it's anything idiosyncratic to crypto, but we're getting caught up in this big move. And I think that's going to take a little bit of time to sort itself out in terms of the underlying flows and the technicals.

DAVID HOLLERITH: Yeah. And Steve, I mean, there's so many factors that do contribute to it, and as you pointed out, it seems like most of what's going on here is macro. But I was just curious, are there any underrated factors maybe that might be playing into the crypto sector sell-off?

STEVE KURZ: Well, what's interesting is there's this-- crypto's a hyper liquid market, and there's this gap between the wall of institutional interest that we see every day that takes-- that's episodic, It's lumpy, it takes time. And then the here and now battle and interplay between crypto and other risk-asset market environments. And so structurally, I think we're quite constructive on how this plays out, but it's not like there's a marginal buyer for every dollar that sells off when you have such a big top-down move.

I don't see anything under the hood in terms of different aspects of crypto that's necessarily worrying. That said, I do think there are idiosyncratic stories within crypto that are-- some are better than others, and some continue to do quite well through this volatility, as you alluded to at the beginning of the segment.

AKIKO FUJITA: Steve, it's Akiko here. Any time we see a sell-off in crypto, we try to think about the correlations, and often they don't always stick. But I wonder where the institutional money has been moving? I mean, we've seen that over the last year, maybe more. But as we see volatility kick in on the equity side, are we seeing money move out of crypto?

STEVE KURZ: We're not seeing institutional money move out. I think there's obviously the-- the obvious liquidations that happen during periods of time like this. The average institution, whether it's a hedge fund or an allocator, is actually very focused on still how to get off of 0, and how to get to 50 basis points in their portfolio in crypto. So the real question is, does this sell-off impact that timeline, as opposed to has it actually been selling. We have a number of institutional clients, we manage certain ETFs and other products. We haven't seen anything out of the ordinary, in terms of negative flows when you think about Bitcoin or Eth. But obviously, there are questions about, you know, are we in a bull market or a bear market, broadly? And I think that'll trickle through to timing, but not necessarily to the ultimate decisions that get made.

DAVID HOLLERITH: And Steve, you know, we can't really forget about the $33 billion into venture capital funding that's been raised over 2021. So I'm sort of curious, in an environment, you know, if we're going to be realistic. Might not be like 2021, what do you think is going to happen to that capital raise? How would it be deployed? How are you expecting to see that in the sector?

STEVE KURZ: Well, it's a great point, and our research team did a great job pulling a report together on this. And what was interesting is the dispersion. It wasn't just growth equity or Series A, it was really from seed all the way through. So there was a healthy-- in the stack of venture investing, it was healthy in across not only crypto verticals, but also across the stage. And so I think a lot of what's being built from the early stage venture side is incredibly interesting and tied to this Web3 metaverse narrative. And then you look at the later stage stuff, there are 43 or 41 unicorns that came out of that bucket last year, and those those companies have to really prove themselves and their revenue lines, and it's a different equation for those companies.

But that's one of the reasons we're so bullish. If you look at NFT activity on OpenSea, if you think about all of the big centralized tech companies moving into the meta game, when you think about the things we're investing in and the funds we're launching, yes, it's a more tactical environment, yes, maybe macro's negative. But I think the three-to-five-year stories are really strong, and that brings talent and more capital into the space. And so we are structurally bullish, but we're trying to look through a little bit of this market noise along the way.

AKIKO FUJITA: Yeah. If we're talking specifically price moves, Steve, I was going to ask you on whether, in fact, you have maybe shifted your price target looking to year end, given the volatility. It sounds like you're even more bullish. Mike Novogratz, we know, has said everything from, what, $500,000 to $250,000. What are you looking at?

STEVE KURZ: Well, look, there's a couple of psychological levels that have broken down. $2 trillion of overall market cap in the space, $40,000 for Bitcoin, $3,000 for Eth. You have to pay attention to that. You have to respect that. I think crypto's higher at the end of the year than where we are today. I don't know that that necessarily happens in the next one month or two months. I think there is some work to be done in terms of that.

And I think, importantly, when you look at the NFT market, which is in the tens of billions relative to the $2 trillion of crypto, you're going to have really idiosyncratic growth stories. It's why we're focused on those early stage aspects. It's why we're focused on active management, quite frankly. This is a trader's market for crypto, but also for macro and other assets. And we think that's probably a good thing for crypto, overall, that you have such a broad palette to now play with from the perspective of a market practitioner.

- You know, the interesting thing right now that we're also seeing, Steve, within the space is the amount of hiring, and the executives that are being added on to so many of these ambitions. And you've got another transition of your own that you've seen within the company. And so walk us through why this made sense right now, and the executive kind of-- how we may see even more of that evolution from tech executives, from finance industry executives, getting into this space.

STEVE KURZ: It's a great point. I haven't seen anything like this ever in my career. But the last time I saw it was really from the sell side to the buy side following the global financial crisis. It's very clear that that trend is happening now towards crypto, both the buy and the sell side within the financial services industry, and then, obviously, centralized tech to decentralized tech. We're delighted to have hired, Bill Burt, who was the CEO of the Portfolio Solutions Group, the $55 billion fund of funds at Blackstone to work with the team here at Galaxy.

The reason for that was obvious. You know, we're trying to build a world-class, institutional asset management business with multiple legs of the stool. And having someone with that kind of expertise scaling a business, multiple business lines, doing it in a regulatory compliant fashion, you need to have adults in the room who have done this before. I think that's a microcosm for everything that's happening at Galaxy, but also across the entire crypto space. We're growing up to meet that next phase, which includes regulatory and education at scale, and doing things, obviously, the right way in an institutional grade fashion.

AKIKO FUJITA: Yeah, so many changes happening, almost on a weekly basis it feels. Steve, we've got to have you back on the show again soon. Really appreciate the time today. Steve Kurz, Galaxy Digital Head of Digital Asset Management. And our thanks to David as well for joining in on the conversation.