2021-06-09 08:00:00

Why Ethereum is seeing traction among financial advisors

Caleb Silver, Investopedia Editor-in-Chief, joins Yahoo Finance Live to break down the investor sentiment survey.

Video Transcript

KRISTIN MYERS: Well, investors still remain bullish despite rising anxiety. And that’s all according to the latest survey from Investopedia. So a lot of data and statistics to chew on here. We’re joined now by Investopedia’s editor-in-chief, Caleb Silver. Caleb, always great to have you here with us. So as I just mentioned, investors still remain bullish. Now, according to you guys, it’s about 44% that say they still are bullish. I’m curious to know how that sentiment, as you guys have been seeing it, is changing. What direction is that headed?

CALEB SILVER: Sure, and it’s great to be with you guys. We’ve been surveying our newsletter readers– it’s about 1.5 million folks– every day since the beginning of the pandemic. We’ve been surveying them about every six weeks. So 44% who say they’re bullish– that’s a little lower than 48% last month, which was a record high during the pandemic.

Still pretty bullish, which is commensurate with the American Association of Individual Investors, Institutional Investors. Still bullish, but they do feel that we’re in a bubble. 63% say we’re in a bubble. 58%, guys, say they think the market is overvalued. And about a third of them, 34%, say they’re making more frequent changes to their portfolio, given some of the anxieties that they’re feeling, given some of the activity and volatility in meme stocks and in cryptocurrency.

ALEXIS CHRISTOFOROUS: OK, so where are they seeing the bubbles? Because there are lots of different pockets of possibility.

CALEB SILVER: Sure, so the biggest bubble they see is in Bitcoin. And following that, it’s Dogecoin. After that, guys, it’s US real estate, which keeps going up. Bitcoin, Dogecoin, obviously, not going up, about half of their value since the beginning of the year. But they still feel it’s bubbly there, even though about twice as many or a little bit more than twice as many of our readers have been adding cryptocurrency to their portfolio in the last three months. They still feel it’s bubbly.

Stocks, not that many people feel that there’s so much of a bubble there, although they do feel it in the meme stocks. And that’s translating into higher anxiety. As you know, we measure investor anxiety based on the terms that they search for on our site, especially those fear-based terms. So we’ve been seeing a ton of activity around naked shorting, short selling, death crosses for some technical analysis patterns, and even some folks worrying about a correction, worrying about a crash.

We’re seeing anxiety bubble up to a three-month high. Not as high as it was 13, 14 months ago, of course, but bubbling up because I think these wild movements in the meme stocks are causing a lot of people to scratch their head and wonder how sustainable this is and if the bottom is going to drop out eventually.

ALEXIS CHRISTOFOROUS: I mean, having said all that, it doesn’t seem like people are pulling their money out. They’re sort of cautious, but still very much committed to this market. I want to get back to the cryptocurrencies because they believe that there is this bubble in different pockets of digital currencies. And it looks like, at least for now, investors seem to be choosing Ethereum. What are you seeing? What’s the trend there?

CALEB SILVER: Absolutely, and of all the cryptocurrencies, and we asked them that very question, which of these cryptocurrencies are you adding or are you selling or are you avoiding altogether? Ethereum kept bubbling up to the top of the list. So you’re seeing a lot of traction with Ethereum, especially in the financial services community. A lot of financial advisors we speak to think that that might be a coin that might make it into the future in fintech. So you’re seeing a lot more activity around that and a lot of searches around them.

One of the most popular searches on Investopedia– and we get a lot of them– is, what are the top 10 cryptocurrencies other than Bitcoin? So people are searching for alternatives. They’re obviously looking at Dogecoin because of the hype. But they’re actually looking at some of these more established cryptocurrencies like Ethereum, like Cardano, like Ripple and others, because they’re looking for alternatives to Bitcoin, given the turbulence with Bitcoin prices over the last three to four months.

KRISTIN MYERS: So, Caleb, I know that we’re talking about areas of great unease and great anxiety. And Alexis, obviously, just asking you if Bitcoin, it seems too risky for folks. What instead? So I want to ask you that question as well about equities. If they’re seeing bubbles when it comes to real estate and when it comes to cryptocurrencies, but they’re staying inside of the markets, what are investors liking right now? Where do they want to put their money instead?

CALEB SILVER: Yeah, so we’ve surveyed our US readers because those are the folks that can invest in some of these stocks. And they’re very true to the blue chips. They’re very true to the Apples and the Microsofts of the world. It’s been that way for the last 12 or 13 months. But what’s new in the last survey and, really, the last couple of surveys is this rotation, along with the broader market.

But the singling out of particular stocks like Ford and ExxonMobil, which have had a great 2021, a terrible 2020, but a terrific 2021, those are new to the list. You know what’s not on that list? Tesla, Nvidia, Google not on those lists. So you’re seeing this interesting rotation of investors who are trying to capture the heat behind oil and energy stocks and behind Ford and GM, which have obviously had a very good 2021.

ALEXIS CHRISTOFOROUS: Getting back to those meme stocks for a minute, where are you seeing investors dipping their toe? You know, we were talking about the fact that a lot of investors may be unknowingly owning these stocks. Because stocks like AMC and GameStop are now part of the Russell 2000 Index. So what are you hearing from them in terms of seeking out some of those meme stocks to add– to actively add to their portfolio?

CALEB SILVER: Sure, well, they were definitely doing that in force about two to three months ago. And remember, around those congressional hearings around GameStop, we saw a ton of activity of folks wondering how to buy it, can they buy it on margin, should they add it, do they have too much of it, which ETFs do these stocks belong to. We’ve seen that cool down a lot in the last few weeks, even though prices for some of these– and we’ve seen some new entrants, as you guys just mentioned– have become very hot again.

I think a lot of folks lost trust in the market. And the original GameStop rally at the beginning of the year, I think we talked about it on your program, because they felt like the stock market was rigged. They felt like the brokers weren’t allowing them to trade when they wanted to trade. They’ve cooled a little bit on some of those meme stocks. But as we saw in this survey and the last survey, we did see a few of those meme stock names on their top list.

KRISTIN MYERS: All right, Investopedia editor-in-chief Caleb Silver, thanks, as always, for joining us today.

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