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How crypto is impacting the ETF space

Cinthia Murphy, Managing Editor of ETF.com, joins Yahoo Finance Live to discuss outlook on the market and cryptocurrency.

Video Transcript

- Let's stick with the markets now and bring in Cinthia Murphy, managing editor of etf.com. Cinthia, I want to bounce off of what we're seeing in the Bitcoin space today. It's not just Bitcoin. Jared went through it-- Ethereum, Dogecoin, they're all falling after what Musk tweeted out. I know there were no US-based ETFs just yet, but how is this playing out in the ETF space at the moment?

CINTHIA MURPHY: Hi, Alexis. Yeah, it's amazing the reach somebody like Elon Musk can have, even in a space like ETFs, where there is no US-listed Bitcoin ETF or crypto ETF yet. As you know, the SEC has been very reluctant to approve any of these funds. They're all sitting in registration waiting for their chance.

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But you still feel the impact of the statement of the price action because, you know, at the end of the day, the ETFs that are in the market today, they own different securities. A lot of them are stocks that are directly impacted by this statement.

So if you think about the blockchain ETFs for example, which is the ledger technology that supports cryptocurrencies, there's several ETFs that are blockchain ETFs, and they will own things like Coinbase, the crypto exchange that is a hit today on this news. They will own even Tesla, which is hit today by this tweet. And one of these funds owns BTC, which is the Grayscale Bitcoin Trust, which is hit by the news.

So you end up having these portfolios that aren't necessarily a crypto portfolio be damaged or hurt by this tweet, and their performance is hurting today. And you see that hit in varying degrees, depending on what kind of exposure the ETF offers.

Even within blockchain ETFs, for example, which is your most direct vector into this crypto story, some ETFs own Coinbase a little bit, some a lot. Some don't own Tesla at all. So own a lot. And so you see the performance very dramatically because of that. So you really should be looking closely at which ETF is in your portfolio and how it's being hit today.

- Now, Cinthia, I think the reason cryptocurrency is of interest to so many people is because of the huge run-ups that we've seen in cryptocurrency. We've all seen that headline. If you put $1,000 into Dogecoin back in January, you would now be able to buy a Tesla. It's now worth $118,000. And there's a lot of these moves being made in the market. Jared was just talking to us about AMC and a couple of other meme stocks that had gotten so popular.

Now, looking at today, we have a nice slight rally and clawback in the losses, at least in the tech sector. And I think this growth versus value debate is one that we've consistently chatted about throughout this year. So I want to put this to you. For folks that are still very much interested in those growth names but are dealing with this rotation out of that sector, how should they be investing and trading through this period of time right now?

CINTHIA MURPHY: Yeah, it's been a very challenging year for the growth stocks. Maybe it's not surprising to most people because the run-up has been so incredible, not just in the last year, but in recent years. So the difference between the performance between value and growth has been massive. And this year, when you get to reopening trade, when you get rates starting to go up a little bit, there's a lot of concerns about the valuations being very frothy in the growth sector and the growth stocks. So naturally, we got into this moment where cyclical stocks, your value names, have been outperforming.

Now, I think every time you look at-- to talk about ARK funds, every time that you look at an ARK fund, and you see that the performance is struggling because not only these are growth stocks, these are like cutting edge growth stocks. And the performance goes down, but you don't see all the assets flow out. You see people see all these moves as buying opportunities.

So it really tells you that you know maybe the opportunity for the big up move is in your value, beat down stocks much more so than in growth because growth has been running up a lot. But there hasn't been a loss of confidence in the growth story, especially in this disruptive tech sector, if you will. So it's been fascinating to watch how we're not seeing people run for the doors every time a growth stock takes a hit.

But there's definitely more caution because everybody's eyeing rates. Everybody's saying inflation, which is going up. People are looking out for hedges to valuations that can come down. So there's definitely a more cautious tone going forward.

- All right, Cinthia Murphy, managing editor of etf.com. And that segment brought to you by Invesco QQQ. Thanks so much for being with us.