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Bitcoin free-falls below $34,000 amid cryptocurrency sell-off

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Yahoo Finance's David Hollerith joins the Live show to discuss bitcoin dropping below $34,000 and why cryptocurrencies are selling off.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: The Bitcoin bulls are licking their wounds for another day after a brutal weekend for the benchmark crypto. At current levels, Bitcoin prices have lost an astounding 52% from their November record highs. Yahoo Finance cryptocurrency reporter, David Hollerith joins us now. David, so we talked to you on Friday, we asked you what your sources were telling you on the sell-off, you said, guys, my sources were not seeing buyers step up here. So what are you hearing this morning?

DAVID HOLLERITH: Well, you know, I'm hearing a little bit of short-term good news and long-term bad news, Brian. Do you want to hear the bad news or the good news first?

BRIAN SOZZI: Bad news. It's the kind of mood I'm in. Fire away.

DAVID HOLLERITH: So I think bad news if you're looking at cryptocurrency not as a risk-on asset but as an inflation hedge, there's an argument to be made for the cryptocurrency if you look at its past four year cycles, which there have only been two of them. So we don't have a lot of data there yet, there could be drawdowns in Bitcoin that are significantly worse than this coming later in the year.

Now, again a lot has changed, we don't know if this time really is different or not but that is something that can be calculated according to its four-year halving cycle. Now, we are thinking of Bitcoin as something that institutions have adopted in a broader sense, meaning it's trading more like a risk on tech sort of stock and so is the rest of cryptocurrency more so. You know, I think after a drawdown like this that we saw starting on Thursday night and then going through the weekend, I think we can expect maybe a little bit of a bounce or a rebound depending on what happens at the Federal Reserve's upcoming meeting on Wednesday.

JULIE HYMAN: Hey, David, I wanted to ask you about the sort of relationship between the cryptocurrencies, the sort of big ones, and everything else. In other words, you know, we've had this big decline there. But at the same time, we've had a seeming explosion in the NFT space for example, and also an interest in central bank coins for example. So the people you talk to, like what's the coexistence of crypto with say the NFT market? And how long can crypto remain down when there still seemingly is demand for some of these other types of products?

DAVID HOLLERITH: Yeah, you know, Julie, that's a good question, and I don't think it's been quite as explored. The underlying understanding with NFTs is that you still have to pay transaction fees to obviously transact NFTs and then also create them. So transaction fees presumably decrease when the price of their underlying token, in most cases, Ether on the Ethereum blockchain, also decreases. So we could see sort of a, you know, a boom of more NFTs coming.

Now, as far as what that means for the value of NFTs more broadly, it's sort of still unclear about how that's-- how they're related. However, over the past two months, we have seen a break in correlation between NFTs and underlying base assets like Bitcoin, Ethereum, Solana.

So I think another thing that's worth noting is that Solana you know, one of these higher trading crypto tokens that powers the contracts that sort of allow NFTs to exist, has also been having some transaction problems recently since this drawdown on Thursday. So that's something to underline. If we see more technical problems with the underlying blockchain, NFTs probably won't have as much success but again that's sort of a short-term thing that we're still looking at right now. I mean, I think the ultimate case for NFTs and cryptocurrencies is not going to be determined this year.

BRIAN SOZZI: All right, David Hollerith on the pulse of all things crypto for us. Thanks so much, David.

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