ETF Edge - A cryptocurrency disconnect 3/9/26

Episode Date: March 9, 2026

Current geopolitical concerns are testing cryptocurrencies. But they’re responding in ways that might be unexpected. Find out what else might be at play under the surface.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by InvescoQQQ. Let's rethink possibility. Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange-traded funds, you're in the right place. Every week we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors.

I'm your host, Dominic Chu. Geopolitical turmoil has certainly been testing investor appetite for things like cryptocurrency. but big price swings of late might actually be driven by something else entirely. Turmoyle in the Middle East has been just the latest test for the stability of the cryptocurrency market, but at least part of the recent wild price swings might be more intrinsic than extrinsic. So here to explain that case is Simeon Hyman, the global investment strategist over at ProShare's advisors, alongside Kim Arthur, the CEO and portfolio manager, over at Maine Management. Thank you both for being here with us right now. And perhaps, Simeon, I'll start with you on this one.

The cryptocurrency side of things has gone through what many are characterizing as a cryptocurrency winter or a real depressed period for prices and interest. How exactly do you put this particular price move that we're seeing in the context of what we've seen in terms of price action for the balance of cryptocurrencies in the market? Sure. Look, military conflicts. We know the drill. It's, oil is going to go back down and equity is going to go back up. That's what's going to happen. But number one, it's just sometimes hard to stay in your seat.

And number two, mitigating volatility in a portfolio means a lot because you can get 8% a year with low volatility. Actually, you'll compound to more than 10% with lots of volatility. So having diversified assets means a lot. And so far in this conflict, actually, if you look at Bitcoin, it's up a little bit and equities are down. So the diversifying piece, I think, still stays intact as an important theme here. And that's what I think is important to focus on. So many folks have concluded that cryptocurrencies, Bitcoin, Ether, Solana, XRP, that they're just risk assets. But if you really run the numbers, you can see that not only do they have de minimis correlation with equities,

but they also have extremely low correlation with gold and silver as an example. So I think the diversification story really holds in in this current environment. Kim, I'd like to bring you into the conversation here. You heard Simeon's response to my question there. I wonder how you would characterize what you've seen in terms of the price action around cryptocurrencies. Bitcoin in particular, it's the biggest one out there. It's the one that's the most paid attention to. But what exactly has that price action told you about whether it is a correlated, non-correlated asset,

what the use case is with regard to the kind of anti-fifference? fiat currency, anti-traditional markets trade, the kind of decentralized finance side of things. How exactly does that shape up, given what we've seen with the geopolitical conflict in the Middle East? Yeah, Dominic, thanks as always. I agree with a lot of what Simeon said. I would parse it this way, though. Price and proof rarely happen at the same time. And Bitcoin was trading at 125,000 five months ago. So it was down 50 plus percent when this conflict. erupted. So I do like the fact that it's outperformed a lot of other asset classes, but you have to widen the lens a little bit on that, and it's up 10% off the lows, which is encouraging,

because as you pointed out, Dominique, I think like we do every four years, we go through a nuclear winter. And I think we're doing the bottoming process in this nuclear winter because you have so many positive things that you were alluding to, you know, all the way from last year when we had the Genius Act. This year they're trying to get the clarity legislation pushed through. You get people like Crackin that are tokenizing with NASDAQ all, you know, stocks, not all stocks, but a handful of stocks starting next year. So these are constructive things that are kind of building use cases, but I think the market is quickly realizing as time goes on. Bitcoin is a digital asset where stable coins are what they say they're a stable currency. Bitcoin doesn't live between both of those

in my mind. It lives in that digital asset speculation purchase. You know, Simeon, a lot of folks over the years have referred to Bitcoin specifically as quote unquote digital gold, right? I wonder if from a market strategist perspective and somebody who's kind of seen how precious metals prices have evolved over time over the course of the last couple of decades, when you look at gold and silver prices and the price action that we've seen, some parabolic moves to the upside. And then you kind of juxtapose them against what we've seen in cryptocurrencies, Bitcoin and Ether specifically. Is it fair in your mind to characterize Bitcoin as digital gold and maybe Ethereum as Digital Silver? When you see what happened with gold prices and silver

prices, how are they similar and how are they different for a trader and investor in this market? You know, when we did some of this research, I was actually surprised at how low the correlation between Bitcoin and silver and gold was. And again, back to the risk, whether it's a risk asset, if you recall, remember the sort of meltdown of a few crypto-related financial institutions, actually cryptocurrencies rose in the midst of that. So that's pretty darn interesting. But I don't think the analogy fits in terms of the specifics of what you just said,

meaning that Bitcoin's gold and ether is silver, because there are different roles for these different pieces of the universe. There are stores of value, and then there are things with utility on the blockchain. And I'm going to stop there because I'm not the super duper expert on the white paper and all those things. But those are very different use cases. For example, Bitcoin is really just a store of value, but Ether has utility on the blockchain. It's one of the reasons why we were really pleased to launch KRIP, KRIP, our ETF just about a

month ago that follows the CoinDest 20 index, which gives you an indexed approach to all these these different coins in the space. There's no stable coins in there, but lots of other stuff. And it's a market cap weighted index, but it's capped. So Bitcoin and Ether are about half the weight. If you took them just in nature, they'd be about 85%. So that's a good way to capture the breadth that's going on here, because yes, there's store value elements to some of the elements to the crypto universe, but there's also defy, there's also utility on the blockchain, and having a broad indexed approach can make a lot of sense. Kim, one of the things that we've seen over the course of the last week or so, a little, maybe I'll

call it a week and a half since the Iran conflict really kind of got going in earnest, was this idea that certain risk aversion type assets or maybe so-called safe haven, if you want to call them those, right? Many of those assets kind of rose up in value, gold and silver, you know, included, but then have seen some weakness on a relative basis in the last few days or so. The risk side of things versus the safe haven side of things is something people look towards in precious metals vis-a-vis the value of the U.S. dollar and everything else. But those cases aren't as easy to make when it comes to cryptocurrencies that are not tied to fiat currencies whatsoever and are meant to tackle different types of roles in a portfolio.

How exactly do you think investors and traders should be looking at the way cryptocurrencies function in a diversified portfolio given what you've seen with gold and silver? Yeah, that's a great question there. I think, again, with looking at Bitcoin as a digital asset, it does provide in a longer sweep of time some diversification in a diversified portfolio. I think this is the first time in probably eight years that I can remember that it really feels like Bitcoin's valuation is behind all the regulatory changes and kind of tailwinds that are going on in the industry, where many times in the past eight years it looked like Bitcoin was

trying to frontrun a lot of that. So that is very, that's very normal for it to happen with an emerging asset class. So I like seeing that going on, and it does give me, you know, conviction that I think the thesis as a risk asset still plays out. I think the other interesting thing, again, kind of breaking out that stable coin, which stable coins are exploding, but it's interesting. 80% of the use case for stable coins is trading other cryptocurrencies, 80%. There's only a couple percent of stable coins that's actually used for going and buying stuff outside of that.

So that needs to continue to expand to get more broad adoption of it. But, you know, we like to kind of expose, express ourselves with BitW, B-I-T-W, that basically is three-quarters Bitcoin, and then it's a little over 10 percent, Ethereum, and then you get a sprinkling of Solano and Link inside of there. You know, it's interesting because there are a couple different approaches that when it comes to cryptocurrencies, and it maybe speaks to what could happen evolution-wise with these products. You know, Simian, you had talked about this idea that you were launching this, You have launched this ETF that is tied to the Coinbase 20 index, and you can kind of look up what those 20 assets are.

That is a kind of passive index oriented approach or an attempt to do that kind of thing for cryptocurrencies. There is, of course, also the case that's being made these days because the hyper growth in many parts of the ETF market has come from actively managed type instruments. So, Simeon, when it comes to your perspective from a strategy standpoint, at what point do you think we will start? start to see a little bit more of a focus on the active management side of cryptocurrency portfolios, the picking, if you will, of these currencies, these cryptos versus taking that more indexed approach from an allocation standpoint. Well, the beauty of the market is that they feed one another. So you want the ecosystem to have plenty of trading.

You want the active folks to be making sure they're there, looking at the marginal price, look at any discrepancies where they see opportunity. But you also want the index-based approach for people who just want to make sure that they're capturing the evolution of the crypto space. One of the nice things, by the way, about the CoinDest 20 index and CRIP as we follow it, is this actually reconstituted every quarter. So it's an index, but it's not sitting there static. We know equity indices reconstitute once a year, but that's like a little thing.

but in the context of the rapidly evolving crypto space, that can be important as well. And we're also talking a little bit about the stable coin space and the Genius Act. And that's super important stuff because that element of real store value in the stable coin space has really been supported by the Genius Act. And it's one of the reasons why I'll give you one more launch. We just did IQMM. It's our pro-share's Genius Money Market ETF. And what we did is we came out with the first ETF that complies with the Genius Act so that the $250 billion stable coin index group can use that as a reserve.

A lot of innovation there, two NAVs every day. You can have same-day settlement, weekly distributions. And that Genius Act is just a smidge more tight than regular money market rules. A little bit shorter, no agencies and a very nice solution. for the stable coin universe. Simeon, could I just follow up really quickly? When you mention that particular fund, it is not a fund that invests in stable coins or other cryptocurrencies. It is a fund that invests in the types of instruments that are approved to back up these stable coin offerings.

Is that right? It's a reserve asset. That is exactly right. It is the first Genius Act compliant money market ETF design, for both regular institutions and individuals, but very specifically to be used for reserve behind the stable coins. Exactly right. Thank you. All right. Kim, back to you here. I mentioned the active versus passive approach here. When it comes to how you would tackle cryptocurrency investing, how exactly then would you,

as an allocator as a portfolio manager, look at some of the risk profiles and some of the return profiles of the kind of bigger cryptocurrencies out there in order to better understand how you should use or how investors should use various cryptocurrencies outside of, say, Bitcoin and Ether to round out their portfolios. Yeah, that's a great question. Again, kind of that BitW is an actively managed by Bitwise. They're kind of actively moving around the components, but as I mentioned, it's such a majority Bitcoin and Ethereum.

for myself as an asset allocator and a portfolio manager, I use, I look at Bitcoin as my benchmark, and then I bench everything else against that. If there's an active manager and even if they're using coins, alt coins that are down the market cap ladder, I'm looking at Bitcoin as their benchmark. And if they can't beat Bitcoin, then why, you know, I don't need their active management if they're just going to cause turnover and other alt coins that don't seem to work. So it really is kind of looking at that Bitcoin, which has been a very, very, very difficult master to beat.

As we've all seen and we've looked at all these active managers, whether it's wrapped in an ETF where they're separately managed account, active managers, they've had a very difficult time trying to beat, particularly the last five years, Bitcoin. So they got their work cut out for them. and I think that at some point as use cases continue to increase, they'll hopefully have a better luck at it. All right, I'd like to kind of round out this conversation before we go with a little bit more towards the kind of news of the day,

the rip from the headlines type stuff here. We'd mentioned before the ongoing conflict within the Middle East that seems to be escalating at this point here. Simeon, I wonder if you might be able to tell us with the years of experience that you've had watching this market and strategizing around it, just how important is this conflict that we are seeing play out in the context of other conflicts that we've seen, whether in the Middle East or elsewhere in the world, and how exactly should investors be approaching what we are watching right now? I ask because over the years, people have talked about the diminishing risk of geopolitical conflict on their portfolios. In other words, they shouldn't pay as much attention because these things do tend to resolve themselves. You alluded to it earlier. Is this time any different in your mind?

It's tough to say it's different. I mean, if we look just a year ago to the 12-day Iran War, markets rebounded. If you look back to the two prior Gulf Wars, which were quite protracted in both of those instances, equity markets pulled back, but then ultimately went up 25, 30 percent in the six to 12 months subsequent to both the first and second Gulf Wars, which were not over in five minutes. So the history here is pretty darn clear, not just in the last few years, but over the last 20 or 30 years, that markets do rebound when, and look, we hope for humanitarian purposes for peace to prevail sooner rather than later. But it's certainly not a time to capitulate, maybe a time to tweak around the edges, some quality stories. We love our dividend growers, but certainly not a time for most people to capitulate. All right. And Kim, I'm going to round out the conversation with you because you are a fund manager that runs a sector rotation fund, one that shifts around holdings based upon what your view is of how sectors will out and underperform. What exactly are you seeing now and how has your portfolio shifted in the last year and especially in the last couple of weeks, given what we've seen in the Middle East?

Yeah, so we have in the last year, particularly the last six months, the shift has been pretty dramatic and it's been away from the asset light plays. Think of communications, technology, think of consumer discretionary, things that, you know, don't, you know, their asset light, like they sound, to asset heavy. And that would be basic materials, energy and industrials that are all playing into the tailwinds where you need to have data centers that need to buy land, then they need to put steel in the ground and then fill it with hard items, or you have reshoring of manufacturing or incentives to create more manufacturing in the U.S. So we think that that theme is still in place, and I would just point out,

I've been doing this for almost 40 years, and in my 40 years, there's been no less than nine times that the market has corrected 20 plus, But over that whole period, it's time in the market because the markets are up 10 plus percent. So I think this two will pass. It seems, I like to always say that fear is temporary, but greed is permanent. And we have a big another thing in the Middle East that we didn't have the last time that the U.S. was involved seriously in a conflict like this. And that's the fact that you have Qatar, Dubai, you have all these places where they've

put a lot of assets in there now and they rely on tourism and robust economies, they are going to want to make sure this thing settled ASAP. Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETFs with our Markets 102 portion of the podcast. Simeon Hyman, Global Investment Strategist over at ProShare's Advisors, continues with us now. Simeon, thank you very much for sticking around for our podcast. I want to pick up the conversation kind of where we left. off during the ETFED show.

And that is to say what the kind of macro perspective that you have about what's happening in the Middle East. We know that war is raging right now, tragically so, between Iran, the U.S. and Israel. But this is not the first time geopolitical issues have flared up in the Middle East. I wonder from your side of things. How have you kind of read into what the market has done reaction-wise? has it followed a script, so to speak, in your mind? And if so, what exactly stood out to you about what we've seen in terms of industries and the types of companies that are the most impacted by the war in Iran?

I'd actually say that one of the surprises to me is the extent of the near-term move in the oil market. Because the one thing that's different than has been true in the past, not just last year, but go back to the first two Gulf Wars is how much oil we make in the U.S. We're now the world's biggest oil producer. We're at 22%. And if you go back to last year, the oil impact, the price impact was relatively muted. But it is all about that straight because if you add up all the Middle East producers, they're bigger than us. So I guess it shouldn't be that surprising.

But maybe I was just a little too taken by the fact that we are now the world's biggest oil producer. But that's the near-term stuff. I think the problem in this trade, if you will, is thinking about it a little bit of as a trade. Because if we know the history is that when this is over, oil prices are going to come down and equity prices are going to go back up. We've seen that. We talked about it earlier in terms of the last conflict and both the first and second Gulf War. Okay, so if we know that, if that's the kind of thing we're trying to not capitulate to, if you try and. to well load up on energy stocks or load up on defense stocks you may be getting into just a short-term

trade and that may not be the best you know possible answer here because it could we we could have hopefully we will have for humanitarian purposes some sort of peace breakouts in an agreement all right so let's get away from the tactical side of things simeon and let's talk a little bit more about the medium to longer term if you were to tune out and i don't mean this in a in a in a of insensitive way. I mean, if you were to look at the market action that we've seen so far, and you were to kind of put that next to the geopolitical flare-ups that we've had over the years, there have been recoveries, and there have been markedly so recoveries in terms of performance in these markets. From a medium to longer-term perspective, do you feel as though opportunities have

been created just based upon what we've seen so far? And if you were a longer-term investor that wanted to invest thematically in certain types of stocks, industries, sectors, whatnot, how exactly would you use this particular set of circumstances to position your portfolio for success years from now? What exactly will outperform in a time like this based upon the available information that you have as a global investment strategist? I think one of the nice opportunities is that a rotation that began several months ago, can help a little bit in the immediacy of the conflict, but also has some durability to it as well.

And specifically, it's people refer to it as the broadening, the broadening away from just the Mag 7 and the Mega Cap tech side. And for us, we think one of the best ways to take advantage of that broadening is through quality stocks. Our flagship is ticker NOBL, the S&P 500 dividend aristocrats. These are companies that have grown their dividends for 25 consecutive years at a minimum. They've been out of favor for several years. They started to turn around last fall. So it didn't start with the Iran conflict, but their high-quality, lower volatility names, they're kind of good to have in a conflict. But the reason we think it's durable is because not only is the price turning around, but the fundamentals are turning around.

What we've seen is if you go back four quarters last year, all the earnings growth was coming from the tech sector. and the NASDAQ 100. Those dividend growers actually at the beginning of last year, their year-over-year earnings were shrinking a little bit. Now the gap has closed, and in fact, it may shortly go the other way, because in Q4, the NASDAQ grew earnings about 14%. The dividend growers, the S&P 500 dividend aristocrats,

grew them 10%. So you're almost now to parity. And I'll say one other thing that's important, in addition to the durable outperformance opportunity from those dividend growers, the other thing that's very important is that it has kept the overall S&P 500 fundamental stable, because now you're filling the gap as the fundamentals are retreating a little bit on that mega-cap tech side, and what that suggests is a little bit of a soft landing. In other words, the outperformance of those dividend growers,

Noble doesn't have to come with a disaster on the mega-cap tech side that we saw at the beginning of the century. Simeon, how much of that is also demographically driven, this kind of renewed focus on value slash dividend paying? Because, you know, we think about dividend paying and we think income, right? That's kind of like the immediate takeaway, the immediate first order impact. And that's why a lot of people invest in some of these dividend aristocrat type companies. They want the quarterly paycheck, so to speak, from the.

those companies, how much of that trade is driven by the demand for income and how much of that trade do you think is going to be impacted by future interest rate policy from the Federal Reserve Bank and others around the world? Well, I think the nice thing about the dividend growers is they're less sensitive to that. So I'll make the distinction between the dividend growers in the S&P 500 dividend aristocrats and noble compared to high dividend yielding or value strategies, synonymous, because high yield means low price. And those are the strategies that have historically been quite sensitive to interest rates and also a source of income for folks who need it. But the very nice thing about the dividend growers

is that they're growing the dividends over time. It's not like a fixed coupon payment. It's not like the lower growth that you get from high dividend payers. You're getting kind of. compound dividend growth over time, it's really a quality story of earnings and cash flow growth that can be much more resilient and not just a trade. I'll give you an example of how this plays out. Take, for example, the equal weight S&P 500 is everybody's sort of favorite alternatives these days. Well, if you just equal weight the S&P 500, you actually degrade its quality. Things like return on assets are lower. But if you take the S&P 500 dividend or risk, that's equally weighted, but equally weighted companies that have grown their dividends over time.

You actually have higher return on assets. Imagine that. You have higher return on assets in the S&P 500 without the Mag 7. So that makes it a little bit more resilient than the simple, shorter term horizon of the rotation you were describing. All right. And Simeon, one final question before we wrap things up here. from a global investment strategist's standpoint. Oftentimes you get asked by clients, favorite parts of the market, and the ones you would stay away from.

So if I was to ask you right now, the two sectors that you think are going to outperform in 2026, and the two sectors that you think you would want to stay the most away from, what would they be and why? Sure. So we'll leave the dividend growers as the general theme,

But I think if you want to boil it down to a couple of other opportunities that are a little smaller in the portfolio, but important, the small cap trade is not over from our estimation. By the way, you can access that through dividend growers as well. We have our RETF SMDV, the Russell 2000 dividend growers, but even just off the shelf, the small cap opportunity hasn't left us yet. The valuation discount has barely been dented from. the beginning of that size rotation. That's an important one. And I do think that there's still an opportunity on the emerging market side. Emerging markets can be a little bit more sensitive to those commodity prices. So if we do get a little bit of sustained outperformance or continued strong performance from both the precious side and the energy side to the extent that not that it's going to stay as high as it is this week, but a little higher than it was last year, that can be very supportive of emerging market equities. All right.

Samian, thank you so much for joining us here on the ETF podcast. We appreciate it. Over the last few decades, technology has transformed our world in amazing ways. Through it all, Invesco QQQEF has connected investors to the forefront of innovation. Access the future today with InvescoQQQQ. Let's rethink possibility. There are risks when investing in ETFs, including possible loss of money. ETF risks are similar to those of stocks.

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