Myles Udland and Brian Sozzi of Yahoo Finance break down Bitcoin’s decline and ARK ETF’s extended decline as equity futures tumbled ahead of Fed Chairman Jerome Powell’s testimony in Congress.
MYLES UDLAND: The big story in the market yesterday is what is happening with Cathie Woods ARK Invest. They have a set of ETFs, five ETFs that trade several, ARKK is the main fund, but they also have ARKW, ARKF, ARKG and ARKQ. All of those funds lost around 3-1 / 2% during yesterday’s trading session. There is a Bitcoin position within the ARK wallet. They also have many of the top tech names that have been such big winners.
And the story of Cathie Wood’s success in recent years, destroying the market on the basis of returns, seeing AUM go from roughly $ 3 billion to roughly $ 60 billion in just a handful of years. Only one major player in the market, Brian Sozzi. But I think it’s interesting to see the action yesterday. And we’ll see how much of a following there is on various of those ARK names that people now associate those funds with. Getting specific pressure. And I think the clearest reason, perhaps, for saying what was hurting tech stocks yesterday.
BRIAN SOZZI: Yes, Myles, let me get back to that point, ARK, because I’m looking at a Jefferies chart right now, and you noticed last week that the six ARK ETFs you track generated $ 2.5 billion. And those six ETFs that Jefferies tracks from the year to date before this defeat saw $ 17 billion inflows to date. So ARK Invest, Cathie Wood, we’ve covered her extensively, really before anyone knew who she was, she’s really gained a lot of attention on Wall Street with individual investors for her performance primarily at Tesla and a lot of these next-gen investments. .
But Myles, today’s sale, it’s really interesting. And I think the establishment now comes here and tries to burst the bubble in Bitcoin. And of course, I know Elon Musk came out over the weekend. He said, quote, “Bitcoin prices seem too high.” But yesterday you brought out Janet Yellen at an event and questioned the efficiency of using Bitcoin. You have Bill Gates questioning the very existence of Bitcoin. As expected.
But again, these are the types of comments when you have a lot of momentum trades and you have a momentum type reversal like a Bitcoin, these are the types of comments that could really blow the bubble. And that’s what we’re seeing, I think here this morning. And it’s not just Tesla under pressure or Bitcoin under pressure, it’s a lot of these other plays. Nvidia under pressure. Their technology gets used to mining Bitcoin. MicroStrategy under pressure. Myles, what does your new convertible debt surge look like given the defeat right now? It seems absolutely absurd.
MYLES UDLAND: Yes, and I think that is interesting, Sozzi, because we are talking about Bitcoin at $ 48,000. A month ago Bitcoin had just broken $ 40,000. We hit 2020, 2021, it’s not 2020 anymore. We hit 2021 with Bitcoin closer to $ 20,000. We beat those record levels of 2017, that was the big event. So we’ve seen the price move considerably in just a couple of weeks here.
And as we’ve discussed many times, the story with Bitcoin is price. I know that Bill Gates can say anything and Janet Yellen can say anything and no one in the coin community likes those comments very much. And I don’t blame them, because the story with all these assets is that the price goes up a lot. And that brings more interest to the space. Create situations like what is happening in MicroStrategy. It makes someone like Elon Musk interested in investing a billion and a half dollars in Bitcoin. And the interest is driven by how expensive Bitcoin is.
Obviously, at $ 48,700, there are a lot of people who have made a ton of money, and they don’t really care that you lost 10% today. And they won’t mind another $ 15,000 if even then they care to be concerned about their properties. So, I think it’s an interesting situation, Soz, when you compare it to, say, Apple falling 10% in one day. They were all going crazy. There has to be a reason why that happens. It’s more difficult with the establishment to talk about Bitcoin because there doesn’t necessarily have to be a reason for it to go up or down as much as it tends to. And it creates a very strange asset to discuss.
BRIAN SOZZI: No, you’re right, Myles. And I want to leave people maybe some positive news this morning, because really, they’re seeing a path in NASDAQ stocks. I’d say you’ve seen the market under pressure for seven days straight. This comes in Evercore ISI this morning. Dennis Debusschere notes, citing, that “the internal aspects of the market are consistent with our view that the market performance bias is deteriorating as real rates rise, but the average stock will be fine and cyclicals are leading.”
He points out that the S&P 500, yes, on a multi-day losing streak, but cyclicals have outperformed defensive ones by 3.2% over the past five days. So while you’re looking at this concentrated pressure on NASDAQ and Bitcoin and some of these hot money assets, for now at least, you might not be seeing anything that suggests there will be a further sell-off or correction on the charts soon.
MYLES UDLAND: Yes, and it goes back to a topic that I know we’ll discuss as we get past this year’s balance sheet, which is really, can the economy and many stocks in the market perform quite well even when the S&P and tech stocks, those high-flying names, are they under pressure? I think the old thing is that what’s bad for the FANG names is probably good for you and me, hoping to get back to real life. Very interesting Dennis comments there, and we’ll see how that theme plays out for the rest of the year.