Geopolitical Tensions and Crypto: Analyzing the Market’s Reaction

Crypto markets selling off overnight as Israel launch air strikes against Iran's nuclear and ballistic missile program and carrying out a targeted military operation.

These strikes were carried out without any support from the US, according to officials.

Now this escalation does come as tension.

Between the two countries remain at a breaking point.

Overnight, Bitcoin pulling back below the 103,000 level.

This morning we are looking at Bitcoin recovering the 105,000 level.

As for Eth, we did see that crypto major sell off by as much as 12%.

And the Genius Act passing a key vote in the US Senate earlier this week, moving it closer to final approval.

The legislation sets rules for stable coins and law enforcement compliance.

The Senate will hold a final passage vote next week.

Well, joining me at the end of a very busy week is Matt.

Hogan, chief investment officer at Bitwise Asset Management.

Matt, happy Friday.

Good morning.

Thank you so much for joining us.

So first and foremost, I do want to start out by looking at the latest reaction overnight and this morning across crypto based on geopolitics.

What did you make of what we saw overnight?

Yeah, absolutely.

This is familiar to investors in crypto when there is a major sort of kinetic military event or a major shock of that nature, crypto often sells off immediately.

It's not the first thing investors buy when they're that sort of event.

They typically rotate into gold or maybe into oil, and that's what we saw.

But if you look at history, crypto is what rebounds the first and rebounds the furthest.

So savvy crypto investment.

I typically buy that sort of liquidity induced dip, and I think that's what we're seeing right now.

I think we saw sort of crypto give a gift to investors who wanted to get in at that $103,000 level that you saw.

Now we're seeing the recovery.

The fundamental news underneath crypto is just so overwhelmingly positive right now that I'm bullish on it in the intermediate and long term.

So I saw that sort of.

Initial reaction as matching what we saw in history and history would suggest we'll rebound first and rebound furthest.

We'll see if that plays out in the coming weeks.

Yeah, and Matt, while I have you here, I do want to ask you about one of crypto's hottest trends right now, and that is publicly traded companies buying Bitcoin and buying even more.

So Bitcoin treasury companies buy Bitcoin for different reasons, some as a hedge against inflation, others.

Show support for crypto and some make buying Bitcoin with debt and stock sales their main business strategy.

So how do you currently balance investor appetite for growth in companies such as GameStop with the trade-off of capped upside and covered call strategy?

Yeah, absolutely.

We're really excited.

We recently brought to market the first covered call strategy on GameStop.

IGME is the ticker of that ETF.

It lives alongside a group of ETFs that we offer here at Bitwise that do covered call against these single stock names.

I missed.

Does it against strategy.

We have one against Coinbase.

I it's marathon, the beauty of these strategies are, look, these are very volatile companies, right?

They own Bitcoin as their primary asset.

Many traded a premium to Bitcoin.

You see significant volatility.

A covered call strategy lets you convert that volatility into high income streams.

So these ETFs like IGME.

Historically have thrown off very high distribution rates, and investors use them to generate high income streams in their portfolio.

We've seen a huge response from investors.

They're interested in this theme of Bitcoin treasury companies, but they're a little bit worried about it or they know it's volatile.

So why not turn that volatility into income, and that's what IGME is doing.

Yeah, and Matt, I wanted to focus on over to Circle, the issuer of Stablecoin USDC.

So that company went public last Thursday here at the New York Stock Exchange under checker symbol CRCL in one of the hottest IPOs of the year.

But with Circle's IPO showing strong investor interest, how important is it for investors to actually include some of these stocks like Circle alongside crypto when it comes to their portfolios?

Oh, I love that question.

It's absolutely critical.

That's to me the overwhelming message of this IPO.

If you were a crypto investor, pre-circle's IPO, I could understand having broad-based exposure to Bitcoin and Ethereum and considering yourself.

Well exposed to what's going on in crypto.

But what Circle reminds us is that there are companies building game-changing services on top of crypto rail.

So Circle only exists because you can move Circle stablecoin on Ethereum and other crypto assets.

But it's generating most of the revenue from the from doing that from the benefit of that.

So to be a diversified crypto investor today, you need to pair broad-based exposure to crypto assets like Bitcoin and Ethereum with exposure to crypto stocks, whether that's through owning Circle directly as an individual stock.

Or owning a crypto equity ETF, we have one called BITQ.

You need both crypto equities and crypto assets to have full crypto exposure, and I think many investors are going to start doing, think of this as a sector of the economy, and you want broad-based exposure in that sector.

OK, Matt, well, we will have to leave it there for today, but next time you're in New York City, please stop by our set here at the New York Stock Exchange.

I will do.

Thanks so much for having me.