Bitcoin (BTC-USD) is finding stable ground after a series of volatility in recent months since reaching an all-time high in price in early 2024. Additionally, the crypto space has seen gains in ethereum (ETH-USD) surrounding the launch of spot ether ETFs after the Securities and Exchange Commission (SEC) approved such product offerings in late May.

IDX Advisors Chief Investment Officer Ben McMillan shares his perspective on crypto based on ETF inflows, comments made by traditional investors like Peter Thiel, and whether President Biden or former President Trump can win over the crypto crowd in the upcoming election.

“If you look at Bitcoin’s correlation to stocks in general… it was very low pre-COVID. And then post-COVID, particularly after the ‘money printing,’ you saw this spike in correlation. And that makes a lot of sense. We think that’s here to stay. Now, that doesn’t necessarily mean it’s going to be as high as it’s been recently forever,” McMillan told Market Domination Overtime. “It’s running at a 0.6 correlation. But we’re not going back to the days where Bitcoin was zero or even negatively correlated to risk assets. So… investors need to understand that Bitcoin’s positive correlation to risk assets is here to stay. It’s something to consider when you think about it in your portfolios.”

For more expert insights and the latest market action, click here here to watch this full episode of Market Domination Overtime.

This post was written by Lucas Carberry Mogan.

Video Transcript

Bitcoin is regaining some momentum to start the second half of the year with prices up around 2% today.

Now, the bullish move after a bad quarter for the cryptocurrency is still about 12% below its March high as investor excitement around the Bitcoin ETS has cooled.

So what can investors expect in the second half of the year? To help us answer that question, we want to bring in Ben McMillan, chief investment officer at ID X Advisors.

Ben, good to see you.

So here we are starting the second half of the year for cryptocurrencies.

I think a lot of people are sitting at home wondering whether or not we’ll see this return of excitement in the cryptocurrency market.

More specifically, Bitcoin, what will it take to regain some of that momentum?

Well, I mean, we have a few short-term catalysts that we can look forward to, the first of which is the presumption of an Ethereum ETF S in the offing, which could really cut into them as early as this week.

We’ve seen a lot of excitement about this, especially as cryptocurrency market adoption begins to expand.

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I think the S ETF did a great job, for lack of a better term, of popularizing the idea of ​​Bitcoin to a broader audience that, you know, probably wouldn’t have thought much about it.

Otherwise, we’ve been hearing these conversations with, you know, we’ve been hearing this in conversations with advisors and institutional investors that we’ve talked to, that when the Blackrock ETF suddenly appeared in the market, they’re starting to, you know, consider it more closely for their, you know, so-called 6040 portfolios.

But I think a lot will depend on the macro scenario in Q3. You know, Bitcoin is, for better or worse, highly correlated with the NASDAQ.

It looks and feels like a very high beta growth stock and, you know, as we see, you know, the emergence of a recession in the US, even if it’s shallow, and we start to see a rotation out of, you know, higher beta stocks, you know, technology type stocks.

I think that could weigh on Bitcoin, you know, but I also want to hear your thoughts on a different topic.

I don’t know if you saw this, but billionaire Peter Thiel was on another network recently and he was talking about Bitcoin and it was interesting, Ben, just because he didn’t seem as enthusiastic as a lot of people would think.

He, he hasn’t heard yet, he has some Bitcoin, but he said he’s not sure if the price will go up dramatically from here.

I’m curious, Ben, what did you think of these comments?

Do these comments matter, Ben?

You know, I, I saw that too.

I found it interesting because it’s hard not to be structurally bullish on cryptocurrencies in general at this point in the cycle.

It’s still very early in terms of adoption rate, you know, it’s still very early also in terms of use cases, you know, a lot of what we’ve seen is just kind of scratching the surface in terms of what cryptocurrency can do in terms of facilitating, you know, real-world outcomes.

Um, you know, we saw a glimpse of that with kind of the defi summer web three.

you know, the idea of, of, of sort of smart contracts and things like ordinals kind of, you know, branching out into the broader world.

So, you know, it’s hard, it’s hard to see how this could be the end of the Bitcoin bull run.

I, I just don’t see it right now, that’s not to say there won’t be volatility ahead.

And again, you know, Bitcoin, you know, Bitcoin will go wherever the macro environment goes.

So I think it’s important for investors to be cautious because, as you know, just because the secular B story or thesis is intact, doesn’t mean it’s going to be straight growth.

But I, I have a hard time believing that, you know, Bitcoin won’t hit new highs in the next, you know, 12 to 24 months from now, Ben, you just mentioned this correlation a couple of times here just in terms of what we’ve seen with some of these higher risk assets and the price of Bitcoin.

We, we take a look at this correlation.

That makes sense?

Given some of the activity that we’ve seen before over the last 12 months and, I guess, building on that, what does that tell us about what that activity could or should potentially look like in the coming months?

Yes, that is an excellent question.

And it’s, it’s a place where, you know, we were, we were very reticent, if you look at the correlation of Bitcoin, then stocks in general or, you know, or tech stocks in particular, it was very low pre-COVID.

And then after COVID, particularly after, you know, the money printing, you saw this spike in correlation and that makes a lot of sense.

We believe this is here to stay.

That doesn’t necessarily mean that it’s going to be as high as it’s been recently forever, you know, it’s operating at a sort of 0.6 correlation, but we’re not going to go back to the days where Bitcoin was, you know, zero or even negatively correlated to risk assets.

So, you know, investors need to understand that Bitcoin’s positive correlation with risk assets is here to stay.

It’s something to take into consideration when you think about this in your portfolios.

But that also doesn’t mean that sometimes it won’t move a little bit differently or that it doesn’t have, you know, some diversification advantage.

But I think again, we always caution investors, think of Bitcoin as a very high beta, you know, kind of a bullish or long-term technology play and, you know, in the context of your portfolios, because that correlation, you know, will ebb and flow around the 0.5 or 0.6 mark, but it won’t go back to zero.

It’s certainly not going to go back to negative now, with, you know, any kind of long-term structural outcome.

So I think, you know, it’s like a high beta tech stock.

Ben, are you surprised by how cryptocurrencies have become an issue in this presidential election?

And do you think, Ben, is there a candidate, Biden or Trump, who will have an easier time winning over the crypto crowd?

Well, yeah, I mean, what’s been interesting to me this election cycle is the degree to which crypto PACs have launched with a lot of force, with a lot of money, and they’ve already been influencing the outcomes, and kind of, you know, the congressional races, you know, we saw the Bronx, there was a big race in California, and, you know, the crypto PAC, you know, fair shake and a few others, you know, have spent real money supporting crypto, you know, crypto-friendly candidates.

And so I think what’s really interesting is that cryptocurrencies are now suddenly kind of a force to be reckoned with.

And I think politicians are paying attention to both sides.

You know, I also think the crypto community, in general, is in favor of a Trump outcome.

You know, if you know Trump, I think he’s been strategic in trying to court the crypto community, saying he’s going to do a lot of good things for crypto.

But I think even if you get a big discount, just the fact that it’s probably going to be at least, it’s going to be a lot more laissez faire than what we’ve seen.

You know, Biden is the one generating a lot of enthusiasm for crypto over Trump.

But yeah, I mean, I think the biggest thing, at least for me, was how active and big the sort of cryptocurrency lobby has become in this election cycle.

And I think this is here to stay too.

Yes, Ben, won’t you tell us a little bit more about the meaning of this and the influence?

Maybe you see this more broadly here, beyond the election.

Well, yeah, I mean, it’s, you know, it’s interesting because I think it’s going to force a little bit more thought-out storytelling.

And I think I should say, I mean, I think the cryptocurrency lobby has done a great job, you know, making it very clear that, listen, this is a source of innovation for America.

And so, you know, we’re not asking for any kind of special treatment.

We’re simply asking that, you know, lawmakers and politicians look at cryptocurrency as a technology, as an input, and not just dismiss it as the domain of illicit criminals and money launderers and things like that, which is kind of the initial narrative or rhetoric that we heard from, you know, some, some, you know, people in Congress, you know, a few years ago.

And so I think it’s been, I think it’s come from a good place.

I think that makes a lot of sense.

And I think that’s really having an impact in terms of educating congresspeople and politicians, and also don’t forget, you know, record amounts of people own cryptocurrencies.

You know, if you look at the estimates, it’s over 60 million people.

So again, it’s not a fringe thing anymore.

This affects a lot of Americans, people are paying a lot of attention, you know, especially if you look at things like, you know, federal, uh, you know, federally backed CBD CS and potential privacy concerns out there.

You know, this is starting to occupy a very real part of the minds of many Americans.

Good.

It’s great to have you on the show.

Thank you for taking the time to chat today.

Absolutely.

Thanks.

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