Don't buy bitcoin now: trader

After bitcoin topped $50,000 Tuesday, Vespula Capital CEO Jeff Tomasulo tells Reuters' Fred Katayama investors will get opportunities to buy the cryptocurrency at better prices later.

Video Transcript

FRED KATAYAMA: Mixed markets Tuesday afternoon as investors plow into cyclicals. Let's get a read into the market action from Jeff Tomasulo of Vespula Capital. Welcome back and good afternoon, Jeff.

JEFF TOMASULO: How you doing, Fred?

FRED KATAYAMA: Doing fine, thanks. Now, financial shares among the biggest drivers north today. Goldman Sachs is up nearly 2% right now on news it will offer robo advisory services to everyday investors. So I took a look at their rivals, TD Ameritrade, holdings is up sharply. So is Charles Schwab. So what are we reading into Goldmans, the probability of its success as it goes into Main Street?

JEFF TOMASULO: Well, I think we got to look at what's really driving the financial stocks today. I think it's more interest rates than, you know, Goldman announcing that they're going to give it to Main Street. But listen, this is a great thing because one of the things that I love about this is the fact that they're not doing individual stocks, right? It's actually creating portfolios and giving access to Main Street to get-- to be able to invest in some of these themes and some of the portfolios that Goldman can create, which is unique on many levels because of the type of research and the type of knowledge that Goldman has.

And, you know, Goldman has started to slowly do this. We saw that with the deal that it made with Apple when they were backing the credit card that Apple came out with. So we're starting to see Goldman branch away from the larger, more sophisticated investor-- the rich clients, as you would say-- and going into Main Street. And it just-- you know, to them it's a money maker. But the true money maker for these banks, and if you look across the board right now-- when you look at JP Morgan, you look at Bank of America, you look at Goldman Sachs-- they're up over 1%, 2% today. And that is because we see the 10-year starting to-- 10-year yield starting to increase.

FRED KATAYAMA: That 10-year yield, I was looking at it, was nearing 1.3%. So what does it talk about the prospects for the equity markets? Is this going to chase the bears away and up and up for financials now?

JEFF TOMASULO: Well, this has been my biggest thing. Once I start to wrap my brain around all the stimulus that we've had since the pandemic and prior to that, right? Any time we've ever seen, you know, the Federal Reserve, Bank of the United States, stop pumping money into the system and as interest rates started to rise, we've seen a sell off in the market. And we're seeing a little bit of that today as interest rates start to rise. The question is, where is that number, right? You just said we're at 1.3 on the 10-year. Did we get 1.5? Did we get to 1.75? We haven't seen those numbers in a long time. Think about this. We were at spots 50 in the middle of the summer, right? So interest rates have come up tremendously off the bottom.

But here's the thing. To me, if it happens over a slow period of time, the market, I think, can digest it. It's the velocity of the move. How quick can it get? If we start to see interest rates get to $1.50 or $1.75 and we do it in a week, in two weeks, that's going to spook the market. And I think you would see that's where people would start to take money off the table out of equities and into more safer stuff. And this is one of the driving forces of the market over the last 10 years. Lower interest rates. So it's something that we obviously need to keep our eyes on over the next few months. And trust me, the Fed does not want this to get away from them because this-- because obviously, major damage considering how much debt we have on the books.

FRED KATAYAMA: Jeff, Bitcoin hit the $50,000 mark for the first time today. It's basically doubled over the last two months. Are we seeing a speculative bubble, or is this justified given that more institutions are getting into Bitcoin? And what does this say about equity markets, for example? The spillover?

JEFF TOMASULO: Well, I think-- listen, there's two things I always say to people when-- I got this about cannabis stocks and we're getting into it about Bitcoin. When you see institutions start to put their money somewhere, you know you have some substance to it. But that doesn't mean it can't be a speculative bubble, right? We've gotten a lot of people-- and Bitcoin has gotten so far ahead of them self, but how do I know if it's ahead of itself, right? We have no idea. And the thing I always say to people, you got to be very careful because, obviously, we've seen Bitcoin go from $20,000 down to $3,000 and then back up. It's the fear-- the FOMO, right? The fear of missing out with Bitcoin.

There's going to be opportunities to get involved. I'm not sure if Bitcoin's that opportune here. I always tell investors, you want to put yourself in a position of strength, not a position of weakness. Buying up here after such a huge move-- you said it-- it has doubled, right? It's made a tremendous move. I feel like you're putting yourself in a position of weakness by buying it at the areas here, even as institutions get involved. I think if you give it some time there's going to be a correction in this. It just happens. That's what happens in markets. You're going to get a good opportunity to buy Bitcoin, probably at better prices. But even if you have to pay higher, it's better to do that after a little consolidation.

FRED KATAYAMA: All right. Thanks a lot, Jeff.

JEFF TOMASULO: Thank you, Fred.

FRED KATAYAMA: Our Thanks to Jeff Tomasulo of Vespula Capital. I'm Fred Katayama in New York. This is Reuters.