Yahoo Finance’s Myles Udland and Brian Sozzi breakdown Bitcoin’s decline and the extended ARK ETF slump as stock futures are down ahead of Fed Chair Jerome Powell’s testimony to Congress.
MYLES UDLAND: Big story in the market yesterday is what’s happening over with Cathie Woods ARK Invest. They have a suite of ETFs, five ETFs trading with various, ARKK is the main fund, but they’ve got ARKW, ARKF, ARKG and ARKQ as well. All those funds losing about 3 and 1/2% during yesterday’s trading session. There is a Bitcoin position within the ARK portfolio. They also have a lot of the major tech names that have been such big winners.
And the story of Cathie Wood’s success over the last couple of years, destroying the market on a returns basis, seeing AUM go from about $3 billion to about $60 billion in just a handful of years. Just a major player within the market, Brian Sozzi. But I think it’s just interesting to see the action yesterday. And we’ll see how much follow through there is into a number of those ARK names that people are now associating those funds with. Getting specific pressure. And I think the most, the clearest reason perhaps to say what was hurting tech stocks yesterday.
BRIAN SOZZI: Yeah, Myles, let me pick up on that point, ARK, because I’m looking at right now a chart out of Jefferies, and they noted last week the six ARK ETFs that they track pulled in a cool $2.5 billion. And those six ETFs Jefferies tracks year to date before this rout, they saw inflows of $17 billion year to date. So ARK Invest, Cathie Wood, we’ve covered her extensively, really before anyone even knew who she was, has really gained a lot of attention on Wall Street with individual investors for her performance mainly around Tesla and a lot of these next generation investments.
But Myles, to the selloff today, it really is interesting. And you have I think the establishment now coming out here and trying to pop the bubble in Bitcoin. And sure, I know Elon Musk came out over the weekend. He said, quote, “Bitcoin prices seem too high.” But you had Janet Yellen come out yesterday at an event, questioned the efficiency of using Bitcoin. You have Bill Gates questioning the very existence of Bitcoin. Unsurprising.
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, these are type of comments that could actually pop the bubble. And that’s what we’re seeing I think here this morning. And it’s not just Tesla getting under pressure or Bitcoin under pressure, it’s a lot of these other plays. Nvidia under pressure. Their technology gets used to mine Bitcoin. MicroStrategy under pressure. Myles, how is their new convertible debt raise looking given the rout right now? Looks absolutely absurd.
MYLES UDLAND: Yeah, and I think it’s interesting, Sozzi, because we’re talking about Bitcoin at $48,000. It was a month ago that Bitcoin had just broken $40,000. We came into 2020, 2021, it’s not 2020 anymore. We came into 2021 with Bitcoin closer to $20,000. We got above those record levels from 2017, that was the big event. So we have seen the price move considerably just in a couple of weeks here.
And as we have discussed many times, the story with Bitcoin is the price. I know that Bill Gates can say whatever and Janet Yellen can say whatever and no one in the coin community likes those comments much. And I don’t blame them, because the story with all of these assets is that the price goes up a lot. And that brings more interest into the space. It creates situations like what’s happening over at MicroStrategy. It gets someone like Elon Musk interested in putting a billion and a half dollars into Bitcoin. And the interest is driven by how expensive one Bitcoin is.
Obviously, at $48,700, there’s a lot of people who have made a ton of money, and they don’t really care that it’s off 10% today. And they’re not going to care for another $15,000 if even then they get interested in being worried about their holdings. And so I think it is an interesting situation, Soz, when you compare it to let’s say Apple goes down 10% in one day. Everyone was freaking out. There’s got to be a reason why that happens. It’s more difficult with the establishment to talk about Bitcoin because there doesn’t have to be a reason necessarily that it goes up or down as much as it tends to. And it creates a very odd asset to discuss.
BRIAN SOZZI: No, you’re right on, Myles. And I do want to leave folks with maybe some positive news this morning, because really, they’re seeing a route in NASDAQ shares. You’ve seen the market under pressure I would say for seven straight days. This comes at a Evercore ISI this morning. Dennis Debusschere notes, quote, “market internals are consistent with our view that market return skew is deteriorating as real rates increase, but the average stock will be fine and cyclicals lead.”
He notes that the S&P 500, yes, on a multi-day losing streak, but cyclicals have outperformed defensives by 3.2% over the past five days. So while you’re seeing this concentrated pressure in NASDAQ and Bitcoin and some of these hot money assets, at least for right now, you’re perhaps not seeing something that would suggest a bigger selloff or correction might be in the cards soon.
MYLES UDLAND: Yeah, and it goes back to a theme I know we’ll discuss as we get through the balance of this year, which is really, can the economy and can a lot of stocks within the market do quite well even as the S&P and the tech stocks, those high flying names, are under pressure? I think the old thing is, what’s bad for the FANG names is probably good for you and I, hoping to get back to real life. So interesting comments Dennis there, and we’ll see how that theme plays out through the rest of the year.