TheoTrade co-founder Don Kaufman was on CoinDesk TV to discuss prospects for Bitcoin, considering inflationary and regulatory pressure, and geopolitical risk. Bitcoin is trading like any other asset class, with more volatility, Don says. Don discusses ways to trade the Bitcoin market through innovative crypto-tracking ETFs. He sees high volatility ahead as the crypto asset class matures. He sees a need for investors to consider more than a buy and hold strategy with crypto.
Lawrence Lewitinn:
Bitcoin's been slammed over the past couple of hours, and joining us now to discuss the markets is Don Kaufman. He's co-founder of trading educator, Theotrade. Welcome, Don.
Don Kaufman:
Thanks for having me on.
Lawrence Lewitinn:
Thank you. So why do you think crypto taking that on the chin today?
Don Kaufman:
Well, really all asset classes are, for the most part across the boards, really feels heavy though, specifically this morning. Everything from the S&P futures, they're down. Volatility indices are actually skyrocketing today, much more so than we've seen in a lot of recent trade.
Don Kaufman:
And actually, I look at the bond market as well. The bond market is rallying right now, which absolutely feels like a little bit of duck and cover. And again, Bitcoin is trading just like any other asset class, just with a lot more volatility.
Christine Lee:
How long do you see this lasting? Any catalysts or tailwinds that could get us out of this or perhaps take us down a leg lower?
Don Kaufman:
Yeah. So as I've been on here week in and week out, I've been absolutely bearish inside of Bitcoin. I hate to be the consummate bear, week in and week out. Nevertheless, there's a lot of headwinds to markets right now, both crypto markets and of course, as I said, all asset classes. And it has a lot to do, obviously, with the Fed and inflationary pressures.
Don Kaufman:
But one of the aspects we're very likely to see in coming weeks, and this is prior to even another FOMC meeting, is that I believe inflation's going to absolutely explode as this is kind of a last grasp, a last gasp, if you will, for different assets in the marketplace, ultimately driving even higher inflation. Everything from housing markets to high ticket items prior to the increase, of course, of interest rates.
Don Kaufman:
Those impacts and that inflationary kind of overview is going to have negative implications, really, to all asset classes across the board. And specifically for me, listen, I'm a volatility trader, so we can't ask for more than this kind of price action. Seeing Bitcoin down today, I know that there's a sinking feeling in the stomach of a lot of traders, but ultimately, we're going to have to go through this and come out the other side before things ultimately settle down.
Christine Lee:
So Don, is there a strategy to navigate through this volatility?
Don Kaufman:
Yeah, so it depends, again, on levels of experience in this marketplace. The strategy that I am actually using is I'll actually trade crypto itself against some of the futures contracts, against even some of the new listed, if you will, of ETF options. And again, I am actually kind of triangulating different positions in there.
Don Kaufman:
One of the limitations that some people will face is, it's difficult in a time of volatility. This isn't exactly a buy and hold type marketplace. So your timing is going to have to be incredibly effective. At this point in time, as again, horrific as this is about to sound, but at this point in time, I don't want to go long crypto until you actually see Bitcoin specifically down into the lower 30,000 handle.
Don Kaufman:
And at that point, I'm even going to tell you you're going to have to kind of reassess. I mean, this marketplace has gotten ahead of itself. Regulators, they're coming right now. I mean, I know just previous to me, you had obviously a discussion about regulation, but that's coming.
Don Kaufman:
Unequivocally, you're going to see a tremendous amount of regulatory activity. And a lot of it stems from, well, you just saw, millions and millions of dollars being spent on Super Bowl commercials is going to bode well long term for some of the crypto asset classes, but in the very near term, is going to provide some regulatory headwinds.
Lawrence Lewitinn:
Do you think that implied volatilities right now are kind of on the low side or do you think they'll start to pick up? And in general, I mean, if your view is that you're ultimately going to have higher inflation down the road, don't you think that would spell a bull case for the likes of hard assets and digital assets such as Bitcoin?
Don Kaufman:
Yeah. First, implied volatility specific to some of the coins, it's likely to pick up again. So it did quiet down, it looks like it formed a little bit of a base, but you're going to see a pickup specifically inside of Bitcoin. We should be rocking back up to 90% implied volatility.
Don Kaufman:
Now, in terms of bullish or bearish case because of inflation, I've heard this for literally decades. I've been in the markets for quite some time and that is equity and indice markets and I always came from the index world. And one of the things I heard, time and again early in my career, is that gold is a great inflationary hedge.
Don Kaufman:
And then of course, I went through the financial crisis. You know what everybody did? They whacked gold. They sold gold, ultimately, to finance carrying other positions. And you have to look at Bitcoin at this point as any other asset class, right?
Don Kaufman:
So if you're trading Apple and you're going to take a hit inside of Apple, what are you going to do? Probably have to finance some of that hit, some of that margin call possibly, with selling out of the crypto. I just don't think we can look at this as, yes, it's a separate asset class, but it's now in a heavy correlation with, ultimately, indices, volatility in the broader market and even bonds.
Emily Parker:
Don, just quickly, the narrative over the past week or so has been that Bitcoin and the crypto markets has been tracking geopolitical tensions specifically with Russia and Ukraine. I'm just wondering if you buy into that narrative? Do you think that's actually what's happening? Because that's definitely been the headlines, right? It's like, okay, people are nervous that Russia's going to invade. Okay, Bitcoin goes down. Okay, Russia seems to draw down. Bitcoin goes up. Do you buy into that or do you think that's just the narrative?
Don Kaufman:
Absolutely, unequivocally yes. Absolutely. There's no question that Bitcoin is seeing some price action based on the geopolitical risk. However, here is the one area that I can tell you right now that would be kind of a bull case for some of the coins in the near term.
Don Kaufman:
Because ultimately, if sanctions hit Russia and hit Russia heavily, okay? There is no question that they're going to go into every stablecoin, they're going to go into Bitcoin. I mean, this is how they're going to circumnavigate it, which is once again, it brings us back to, of course, US regulatory bodies. And really throughout the entire world. They're going to be talking about this for decades. The regulatory constraints, can they be put on? Can sanctions even work in a marketplace that's completely decentralized?