Key takeaways

• Bitcoin’s status has shifted to a risk asset, performing well during monetary accommodation periods.
• Its volatility needs to align more closely with traditional currencies for broader acceptance.
• The crypto market must reassess its position amidst rising demand for traditional safe havens like gold.
• Precious metals are increasingly sought after as safe havens, with yields on treasuries and bonds rising.
• Bitcoin’s perception as a risk asset is influenced by its success with ETF launches.
• Digital asset treasury companies may not be a sound investment due to perceived overvaluation.
• There is a high correlation between Bitcoin prices and the Nasdaq 100, indicating interconnected markets.
• Recent crypto price increases were driven by digital asset treasury company purchases.
• Speculative assets like Bitcoin require new money and enthusiasm to sustain momentum.
• Bitcoin’s volatility challenges its role as a reliable store of wealth compared to gold.
• Gold’s historical stability gives it an advantage over Bitcoin during market downturns.
• Stablecoins may divert safe haven demand away from Bitcoin due to their low volatility.

Guest intro

Steve Sosnick is Chief Strategist at Interactive Brokers and Head Trader of IBKR Securities Services, the firm’s trading division. He joined Timber Hill, Interactive Brokers’ predecessor, in 1995 as Equity Risk Manager and options market maker, later leading the firm’s expansion into Canada and developing algorithmic trading strategies for stocks and options. He frequently appears on Bloomberg TV, CNBC, and Fox Business to analyze market dynamics including gold and crypto.

Bitcoin’s evolving role in the market

• “Bitcoin has become a risk asset and has performed well during periods of monetary accommodation.” – Steve Sosnick
• Bitcoin’s volatility must decrease to achieve currency-like stability.
• “Bitcoin needs to achieve a level of volatility more akin to traditional currencies.” – Steve Sosnick
• The perception of Bitcoin as a risk asset is partly due to its ETF launch success.
• “Bitcoin’s success with ETF launches has contributed to its perception as a risk asset.” – Steve Sosnick
• Bitcoin’s correlation with the Nasdaq 100 highlights its integration into traditional markets.
• “There is a high correlation between the price of Bitcoin and the Nasdaq 100.” – Steve Sosnick
• Bitcoin’s volatility makes it difficult to view as a reliable store of wealth compared to gold.
• “Bitcoin is fundamentally different from productive assets like stocks because it does not generate earnings or revenues.” – Steve Sosnick

The rise of traditional safe havens

• “Demand for precious metals is increasing as investors seek safe havens.” – Steve Sosnick
• Gold’s performance has recently outpaced Bitcoin, attracting investors.
• “Gold has recently outperformed Bitcoin, but their performance over a two-year period has been relatively similar.” – Steve Sosnick
• Gold’s historical advantage over Bitcoin is significant in times of crisis.
• “Gold has a historical advantage over Bitcoin as a more stable asset.” – Steve Sosnick
• Portfolio shifts favor gold over Bitcoin when gold is performing better.
• “Portfolio shifts are influenced by asset performance, leading investors to favor gold over Bitcoin when gold is performing better.” – Steve Sosnick
• Gold’s stability during market downturns makes it a preferred safe haven.
• “Gold may be a better safe haven during acute market downturns compared to Bitcoin.” – Steve Sosnick

The role of digital asset treasury companies

• Digital asset treasury companies have driven recent crypto price increases.
• “The recent bounce in crypto prices was largely driven by buying from digital asset treasury companies.” – Steve Sosnick
• These companies may not be a sound investment due to overvaluation concerns.
• “Digital asset treasury companies are not a sound investment strategy.” – Steve Sosnick
• The interconnectedness of crypto and traditional markets is evident in Bitcoin’s correlation with the Nasdaq 100.
• “We already had a pretty high correlation between the price of Bitcoin and the Nasdaq 100.” – Steve Sosnick
• Speculative assets like Bitcoin require fresh money and enthusiasm to maintain momentum.
• “Speculative assets require fresh money and enthusiasm to maintain their momentum.” – Steve Sosnick

Stablecoins and their market impact

• Stablecoins have lost some of their appeal in the market.
• “Stablecoins have lost some of their appeal in the market.” – Steve Sosnick
• Safe haven demand could shift from Bitcoin to stablecoins due to their low volatility.
• “Stable coins may attract safe haven demand that could otherwise go to Bitcoin.” – Steve Sosnick
• Tokenized gold could siphon off demand from Bitcoin by offering blockchain benefits.
• “Tokenized gold may siphon off demand from Bitcoin in the future.” – Steve Sosnick
• Stablecoins’ role in the crypto ecosystem is evolving as market dynamics change.
• “I do think stablecoins have taken a lot of that luster.” – Steve Sosnick

Geopolitical influences on markets

• Geopolitical events often lack direct implications for major companies’ stock prices.
• “Geopolitical events do not significantly impact stock markets.” – Steve Sosnick
• The market’s reaction to tariff threats is significant due to their impact on trading relationships.
• “The market’s reaction to tariff threats is significant because it directly impacts trading relationships and company valuations.” – Steve Sosnick
• The ongoing issues with US-EU trade agreements could delay their ratification and implementation.
• “The ongoing issues with US-EU trade agreements could delay their ratification and implementation.” – Steve Sosnick
• Weakening NATO plays directly into Putin’s strategy and could have significant geopolitical implications.
• “Weakening NATO plays directly into Putin’s strategy and could have significant geopolitical implications.” – Steve Sosnick

Central bank independence and market stability

• Central bank independence is crucial for effective monetary policy.
• “Central bank independence is crucial for effective monetary policy.” – Steve Sosnick
• The central bank’s interest rate policy is the most effective method for fighting inflation.
• “The central bank’s interest rate policy is the most effective method for fighting inflation.” – Steve Sosnick
• The inflation of the 1970s was exacerbated by low interest rates maintained for too long.
• “The inflation of the 1970s was exacerbated by low interest rates maintained for too long.” – Steve Sosnick
• There is a bipartisan consensus on the importance of central bank independence for market stability.
• “There is a bipartisan consensus on the importance of central bank independence for market stability.” – Steve Sosnick

The impact of tariffs on markets

• Tariffs are a tool used by the president and their implementation can be quite fluid.
• “Tariffs are a tool used by the president and their implementation can be quite fluid.” – Steve Sosnick
• The Supreme Court’s ruling on tariffs could have significant implications for their future implementation.
• “The Supreme Court’s ruling on tariffs could have significant implications for their future implementation.” – Steve Sosnick
• The stock market’s resilience amidst political volatility reflects the belief in US policy stability.
• “The stock market’s resilience amidst political volatility reflects the belief in US policy stability.” – Steve Sosnick
• The US has created significant goodwill globally, which helps buffer markets against political volatility.
• “The US has created significant goodwill globally, which helps buffer markets against political volatility.” – Steve Sosnick

Currency markets and carry trades

• The weakening of the yen relative to the dollar is influenced by a lack of confidence in the Japanese bond market.
• “The weakening of the yen relative to the dollar is influenced by a lack of confidence in the Japanese bond market.” – Steve Sosnick
• The carry trade involves borrowing in yen to invest elsewhere, but rising Japanese yields diminish the yield advantage.
• “The carry trade involves borrowing in yen to invest elsewhere, but rising Japanese yields diminish the yield advantage.” – Steve Sosnick
• The recent rise in Japanese yields has negatively impacted global bonds, including US bonds.
• “The recent rise in Japanese yields has negatively impacted global bonds, including US bonds.” – Steve Sosnick
• The analogy of the ‘taco trade’ is not appropriate for the current market situation.
• “The analogy of the ‘taco trade’ is not appropriate for the current market situation.” – Steve Sosnick