Crypto, blue-chip companies 'are holding up against the mother of all stress tests': Analyst

Genesis Trading Head of Marketing Insights Noelle Acheson joins Yahoo Finance Live to discuss how the Fed will impact the crypto space, the crypto market sell-off, and how some companies are bouncing back.

Video transcript

- Well, crypto was once actually hoped to be an inflation hedge and as well as a safe haven amid turmoil as a way of doing it through decentralized finance. As we've seen, that ship has clearly sailed. But let's take a deeper dive now with Noelle Acheson, Genesis Trading head of market insights, to see what's happening with crypto. So, Noelle, obviously we saw a lot of volatility going into this as we see what's happened with Bitcoin prices still hovering around that 20,000, 21,000 mark. What state is crypto in right now?

NOELLE ACHESON: Thanks, Rochelle. Great to be with you. I do have to say that nothing I say is investment advice, obviously. And everything I do say are my opinions and not that of my employer. But, seriously, a very welcome rally on the back of the Fed announcement today, much like with traditional markets. And it's interesting in terms of the correlation.

We saw the correlation between Bitcoin and the S&P 500 hit all-time highs in early May. Then with the Terra implosion, that starts to decouple. It's been trending down ever since. But it's still above 0.5, which shows that while less affected by macro considerations, crypto markets are still very largely influenced by macro sentiment. And the relief rally is, after what we've seen over the past few days in the crypto markets, as I'm sure many of your viewers are aware, very welcome.

- Well, Noelle, with the crypto market clearly on shaky ground, you can see that from the reaction that we've seen in Bitcoin over the last several weeks. Now we're seeing the Fed get more and more aggressive. Yes, Bitcoin and the equity markets reacting OK today. But what does that mean, for a few weeks down the line or looking ahead to July for the Fed's next meeting?

NOELLE ACHESON: That's a very good question. We have been hit hard by sentiment over the past-- ever since the beginning of May, actually with the Terra implosion. And what we're seeing now with some of the unwinding of leverage positions in the market is it's a different crisis, but it's a continuation of that.

However, as we all know. We've been through this before. And any crisis, while not to belittle the pain that many investors are feeling, and in crypto, the pain can be quite intense, but not to belittle that, any down market does set the market up for upside on the other side. And what is interesting is the differences between this crisis and the last time we were with this type of a drawdown, which was back in late 2018. Very different market now. Very much more institutional.

We're seeing crypto being talked about in regulatory offices at the highest level all around the world. We're seeing crypto being discussed in boardrooms at the highest level all around the world. The diversity of investors, the diversity of use cases is clearer than ever. And that's just Bitcoin. Going down the stack, DeFi, while it may have issues, let's take a moment to appreciate how well it is actually holding up. Sure, there are some exceptions. But some of the blue chips that have been around for a few years now, they're holding up under the mother of all stress tests.

- And you hear it in Congress very often. You also hear it, of course, with fidelity and retirement. But what I hear about those who have stayed on the sideline through all of this, Noelle, is, what is it? How do I view it? Because they were told it was a hedge against inflation. We have now learned that is not the case. And it appears to be trading like a very volatile and very risky tech stock. So those that have remained on the sideline, how should they view it?

NOELLE ACHESON: I love that question, Dave, because it highlights one of my favorite aspects about Bitcoin in particular. And while this is not investment advice, it highlights that Bitcoin is many things to many people. That gives it resilience. Diversity breeds resilience. It has a diversity of investor cohorts. It has a diversity of use types. For some, it is a store of value, a long-term emerging store of value.

And inflation hedges are not supposed to be short term anyway. So a long-term store of value given its hard cap, given the potential changes in the deman. For some, it is a risk asset. For some, it is an early stage technology play. And for others, it is a payment mechanism. While you or I may not need it, for that, much of the world does it is still better than what they have. So that diversity of thought around Bitcoin is one of its strongest features. And the answer to the question of what is Bitcoin, it is-- and this may sound hand-waving, but it really is whatever you want it to be.

People often ask me, Dave, how do I get my head around this industry? How do I come into this industry? What do I look for? And my answer is always, well, look around. Any problems that you think might need to be solved in the world, there is a solution being worked on in the crypto industry. There really is something for everyone here. And so my advice-- this is investment advice-- is learn about it. Learn about the market. Think about what you think needs fixing. And then try and understand what the crypto industry itself is doing about that.

- And you raise a good point there about classifying it. We know regulators still grappling with that. A big thank you to Noelle Acheson there, Genesis Trading head of market insights.