Crypto strategist sees pullback in bitcoin and ether as a healthy sign after massive rallies

Crypto bull Meltem Demirors said Wednesday she believes the recent turbulence in bitcoin and ether are positive long-term developments, contending the optimistic story around the digital assets remains intact.

“It’s been really frothy. There was a lot of leverage in the markets. Some of that got taken out in April,” the chief strategy officer at CoinShares said on CNBC’s “Fast Money.” However, she added, there “still was a lot of leverage, so this correction we’ve seen is healthy. A pullback is normal in crypto.” 

Demirors’ remarks follow a particularly volatile stretch of trading in bitcoin, which is the world’s largest cryptocurrency by market value.

At its low point of the day, bitcoin was down more than 30% on the session to $30,001.51, according to Coin Metrics. That represents its lowest level since late January and put bitcoin down well over 50% from its all-time high above $64,000 in mid-April.

Bitcoin recovered some of those losses Wednesday, trading above $39,500 as of 6:15 p.m. in New York. It nevertheless remained down more than 8% in the past 24 hours.

Ether, the second-largest cryptocurrency by market value, has also declined sharply in recent days after reaching an all-time high above $4,300 last week. It was down about 22% in the past day to trade around $2,600 per token Wednesday. Ether, which runs on the Ethereum blockchain, started the year priced below $800 apiece.

Demirors said she believes investors across asset classes are broadly trying to reduce risk, which is playing a prominent role in the crypto plunge. She said her firm, which has around $5 billion in assets under management, has observed a bearish trend in options activity over the past two weeks.

“I think right now we’re seeing skittishness around risk in general, so allocators are pulling back. We saw this reflected in fund flows last week,” added Demirors, who previously told CNBC she got into bitcoin when it was around $150 apiece.

“We saw $50 million in net outflows from bitcoin fund products last week. So, I think this is skittishness. It’s tied to macro. It’s tied to overall markets, tax-day selling. People just get anxious and that’s what we have here,” she contended.

Another factor that has appeared to influence crypto markets recently are comments from Tesla CEO Elon Musk, whose electric vehicle maker owns bitcoin. However, after his announcement last week that Tesla would stop accepting bitcoin as payment, hundreds of billions of dollars were knocked off the crypto market.

Musk sent out a tweet Wednesday that implied Tesla would not be selling its bitcoin holdings.

According to a new note from JPMorgan, institutional investors have recently been moving out of bitcoin and into gold. The firm’s research is notable because adoption of bitcoin by institutional investors has been cited as one reason for the rally that began last year.

Demirors is not the only longtime bitcoin believer who is remaining confident in the face of recent selling. Bill Miller, the famed value investor and bitcoin bull, told CNBC earlier Wednesday the recent drop in bitcoin is “pretty routine.”