Bitcoin Slides, Inflows Grow: Adam Lynch on Crypto Trends, Clarity Act

Nicole (0:00)

We welcome Adam Lynch, Director of Equity Research, Charles Schwab. Great to see you. So what are your thoughts? Where do we stand now? Some of the flows that we've been seeing in Bitcoin and Ethereum, the prices right now. Bitcoin is a bit risk off as we're seeing the stock market risk off as well. Some of your thoughts.

Adam Lynch (0:18)

Yeah, sure, hi Nicole. Yeah, definitely risk off today. I think that's with, you know, due to the inflation report this morning, making a rate hike maybe a little bit more likely. I think the odds of that shot from 60% up to 74% or so.

So that would be a negative for our risk assets here. But yeah, they're both off a bit. Bitcoin is around 77K, Ethereum is just over 2400, I think. They have seen pretty healthy inflows this month, which has been great to see about 700 million for Bitcoin products, 150 million or so for Ethereum.

However, just yesterday we saw outflows from Bitcoin, about 120 million, while those Ethereum products had an inflow of about 35 million. So that was pretty interesting to see, a little bit different than your typical flow. We tend to see more flows going into Bitcoin, but it could be a sign of maybe some growing institutional interest in some of those staked Ethereum products that have been released. But it's something that we're going to keep an eye on.

Nicole (1:19)

Look, the Genius Act, as I get to the Clarity Act, really sort of set the establishment of the federal framework. And now everybody's waiting on the Clarity Act, which I guess has been brought back to life to a certain extent for September 15

Your thoughts, is any of it priced in to crypto? For the crypto folks, they want to know.

Adam Lynch (1:42)

Yeah, I would say that passage of the Clarity is not priced in. We had been looking at this when it was even more likely to pass, and the odds were up around 40 or 50 percent, and we still didn't think it was priced in at that point. We're sitting here right now, we're going to have a procedural vote on the 15th next week. We'll see where it goes. It needs 60 votes, so we still need to pull some Democrats over to the other side. There's some issues with some of the texts that talks about conflicts of interest and President Trump.

We'll see. I think it could get through when they pour all this blood and sweat into bi-partisan legislation. They like to see something come from it, so we'll see.

Nicole (2:26)

All right, let's talk about what's going on. As I take a look here at the story in crypto and look here at hyperliquid in particular, which has had this big surge, moved higher, and we have the story with the Nasdaq investing 100 million in the Kraken parent. Payward, it's in advance talks with hyperliquid. What's going on there?

Adam Lynch (2:46)

Yeah, that's been fascinating to watch over the past couple of weeks. Hyperliquid caught a lot of attention after President Trump mentioned it at that crypto summit a couple of weeks ago.

Then there was some news about them potentially making an agreement with Kraken, Payward's child company, I guess you would say, to bring their perpetual futures product, hyper's perpetual futures product here to the US. That could be huge. Nasdaq investing $100 million in Kraken just essentially strengthens that relationship that they've already had. But what they're really trying to do is build out that market infrastructure so that capital can move quickly, efficiently, sort of have an always on type market infrastructure for these sort of products.

Nicole (3:38)

Let's talk more about the stable coin push, right? And we think about tokenization. Where do we stand there? When does that become really mainstream?

Adam Lynch (3:49)

That is a fantastic question. Obviously, you mentioned, you know, the act that we had passed, they sort of set the stage for what we're seeing with the stable coins.

It's definitely going to be a really big important thing. I think as you see these new rules where, you know, they need to be backed by government treasuries or things like that, that brings in a whole new ball game, a whole new asset class into the activity that we're seeing within crypto. So it's going to be interesting. There's going to be a lot more tokenization of different products. We're just going to have to see where it goes.

Nicole (4:30)

We think about the technical analysis, last but not least. I mean, we had Eric Crown, who actually was a former NYC market maker who thought Bitcoin was headed to $90,000 in October if September is a positive month. I don't know if there's any historical data, one versus, if September is up, is it higher in October?