Long-term bitcoin optimism still warranted: Analyst

Bitcoin (BTC-USD) has begun to recover some of its losses after logging its worst single-day drop since the FTX collapse. The digital asset has seen large inflows following the SEC's approval of spot bitcoin ETFs. Oppenheimer Executive Director Owen Lau joins Yahoo Finance to give insight into whether investors should be buying into the dip or whether they should be wary.

Lau elaborates on his optimism for the asset: "Over the long term, we are still optimistic because of a couple reasons. Number one, we still see further adoption for spot bitcoin ETF. We are just still in the early innings. Remember, bitcoin is a global phenomenon. So I think BlackRock listed in US and they just listed IBIT, their spot bitcoin ETF in Brazil. So you can tell many of these asset managers can list this product overseas... You can also buy bitcoin in Asia, in Singapore and also in Europe. "

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

BRAD SMITH: Bitcoin recovering some of its earlier losses, hovering around $64,000 just shy of that this morning after logging its worst single day drop since the FTX collapse. According to Yahoo Finance data now, the cryptocurrency falling from all time highs. It just hit last week. Joining us now, we've got Owen Lau who is the Oppenheimer executive director and senior analyst. Owen, for this dip should investors be buying in or should they be a little bit wary of what's taking place.

OWEN LAU: Yeah. Good morning. Thank you for having me. So I think the reason for this correction or a couple of things, number one, Bitcoin was up 150% in 2023. It's up 50% year to date. And then if you look at the recent strength in Bitcoin, a lot of-- I think a big part of that is tied to the recent strength in the spot-- the net inflows into the net spot Bitcoin ETF. And we started to see some net outflows from this product.

And finally, and what you just talked about was the inflation data was harder than expected. And we are actually looking to see whether the Fed will cut three times this year. So what I would say is maybe investors can be a little bit more patient and wait for a little bit for this correction.

SEANA SMITH: When we talk about the downside risk here, Owen, how big of a drop are you expecting. We're right above 63,000 today. Could we drop below 60,000?

OWEN LAU: Yeah. It is possible. But I think it's-- again, this is data dependent. So what we just start to see was the bigger outflows from this product. I think yesterday we saw $600 million outflow from all these product are mainly driven by Grayscale. And then the Fed decision today is pretty important as well if the Fed decided to let's just cut two rates. I think there will be further room to drop for Bitcoin.

So I think right now, we're just like data dependent. And it's possible that it can dip further.

BRAD SMITH: It's really interesting as we think about the number of ETFs that have really boomed the inflow into crypto in general here. Now when it comes to where we might see rotation or profit taking along the way, what type of shocks should holders of Bitcoin or crypto more broadly be ready for or prepared for?

OWEN LAU: I think if you look at the history of Bitcoin volatility, it has been one of the most volatile assets. So I think for new investors coming into this space, if they don't know about the history of Bitcoin, just go back and check about the history. Expect volatility in investing in this asset class. So this is a high beta technology company. If you want to like use the equities as an analogy, some people use that as a digital gold.

But in any way if you look at the history Bitcoin, it has been very volatile. So expect volatility going forward.

SEANA SMITH: Oh, and going back to what you were saying earlier just in regards to the sentiment shift that we have seen. Do you think it's warranted at this point, given the fact that there is many reasons like you have laid out in recent research notes to be optimistic about the price in the long term?

OWEN LAU: Yeah. I think over the long term, we are still optimistic because of a couple of reasons. Number one, we still see further adoption for spot Bitcoin ETF. We are just still in the early innings and remember Bitcoin is a global phenomenon. So I think BlackRock listed in US and they are just going to list or they just listed IBIT, their spot Bitcoin ETF in Brazil. So you can tell many of these asset managers can list this product overseas.

So, and this product is homogeneous. You can also buy Bitcoin in Asia, in Singapore and also in Europe. They are the same. And the second point is right now, I think the headwinds we are seeing part of that came from-- probably came from the Fed. So if the Fed decided to, OK, let's cut more rate next year, we still see the case and catalysts that can support the Bitcoin price longer term. So I would say longer term, we are still optimistic about the Bitcoin price action.