The cryptocurrency market continues to take its lumps, but for curious investors looking to jump in while names like Bitcoin and Ethereum are down, you might want to wait a bit longer. So says Larry Berman of ETF Capital Management, who is advising would-be crypto-fans that the sector is not a place for long-term investing.
“I’ve said for several years that I don’t have a strong bullish view on crypto in general as an asset class,” said Berman, chief investment officer at ETF Capital, who spoke on a BNN Bloomberg session on Monday. “I think a lot of them will eventually evaporate.”
The price of bitcoin was down about one per cent on Monday, furthering losses that have made June a month to forget for cryptocurrencies. Bitcoin is now down about 34 per cent this month and down 56 per cent year-to-date, while Ethereum is down about 68 per cent for 2022.
The crypto market has relinquished much but not all of the gains made over a heady 2020-21 stretch that saw bitcoin rise from under $10,000 in the summer of 2020 to as high as $67,000 by this past November.
And while the argument can be made that stocks in general have been down plenty over the past half-year, that probably comes as little solace to cryptocurrency proponents, especially those who advocated for the coins as a gold-like hedge against inflation and/or market volatility.
The news got worse on Monday as Canadian-traded crypto platform Voyager Digital announced that established crypto hedge fund Three Arrows Capital had defaulted on a loan of US$350 million and 15,250 bitcoin. Three Arrows also reportedly had problems earlier this year in meeting a margin call with a pair of crypto lenders. Voyager said in a statement that it intends to pursue recovery from Three Arrows, saying that its trading platform remains operational and that it ha about US$137 million in cash and owned crypto assets on hand. Voyager’s share price was down about 23 per cent on Monday and has lost over 95 per cent of its value this year.
“We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands,” said Voyager CEO Stephen Ehrlich in a press release.
Berman says that while not a sound, long-term investment vehicle, the ups and downs in crypto-land may make for possible trading scenarios, although probably not at the moment, since more losses are likely to come. He pointed to the newly-minted Proshares Short Bitcoin ETF (Proshares Short Bitcoin Stock Quote, Charts, News, Analysts, Financials NYSE:BITI) as a possible option.
“[Bitcoin] is an asset that we can trade. And so now with an inverse exposure to Bitcoin as a trading vehicle, can you use it to hedge maybe some of your underlying Bitcoin exposure if you have that? The answer would be yes, [but] I’m not using it and I I’m not going to ever put Bitcoin in my portfolios,” Berman said.
“But as a vehicle to hedge or speculate, I don’t have I don’t have a problem with it. I’m just not going to recommend the timing of markets as it relates to Bitcoin,” he said. “I do think there’s more downside to Bitcoin than there is upside in the context of the balance of the year here. Maybe there’s another buying opportunity down the road.”