Crypto: Why bitcoin’s price is dropping

Yahoo Finance's David Hollerith joins the Live show to discuss bitcoin reaching its lowest level since July 2021.

Video Transcript

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- Well, Bitcoin is slumping to its lowest level since July of 2021. As they fall in tandem with equities-- stocks falling again to start the week-- the crypto carnage has extended into Ethereum and Solana, as well. Let's take a look at where those are trading right now. There you go. That's the Bitcoin chart, down more than 6%. Bigger losses for Ether and Solana, as well.

Joining me with the latest is Yahoo Finance's David Hollerith. David, how do we explain this? I mean, it is an ugly day across the board. But what are you seeing on the crypto side?

DAVID HOLLERITH: Yeah, well, Akiko, I think the fundamental thesis for Bitcoin and Ethereum, which is sort of-- it's more than 60% of the total value in crypto assets, is that they increasingly move in correlation with stocks and other risk-on assets, most notably the NASDAQ, except for the fact that they tend to trade in more exaggerated, volatile trading periods. And of course, the crypto market never closes, so you'll see trading over the weekend.

Now, since-- following sort of the FOMC's meeting on Wednesday, you know, cryptocurrencies saw a drop on Thursday. And that continued through the weekend. Since Thursday, we've seen about $305 billion move out of the cryptocurrency market. And during that time, we've seen Bitcoin hit its lowest point. And as I say, hit its lowest point, it's actually happened within the last hour.

So investors, traders, in particular, are still looking for the bottom, at least in this sort of trading cycle. And you know, it's obviously pretty tough to tell. You know, because cryptocurrencies don't necessarily trade on, you know, discounted cash flows, technical measurements are really important for the asset class. So people are oftentimes looking at sort of these key price points for where traders might come in to buy the asset.

Now, $34,000 for Bitcoin was a pretty strong point of resistance where buyers would come in. We've since hit below those levels. We're trading in the mid $32,000 range. So you know, I think that traders apparently have more support at the $30,000 mark, but it still remains to be seen whether or not they will come in at the same point.

Obviously, the $34,000 mark has been breached. I've spoken with some institutional traders, and they've sort of pointed out that, you know, there's not like a massive flood of institutions coming in to short the market, as it were. More so what's happening is the macro geopolitical landscape, that whole backdrop looks pretty poor right now.

So a lot of institutions who have their money in crypto, or did, are-- you know, what-- you know, they're essentially selling off parts of their portfolio, what you call trimming. So you know, they're going to wait until there's a little bit more certainty, until maybe a temporary bottom is found for the asset class. But largely what I've heard is that May-- the rest of May and June don't necessarily look good for Bitcoin and other cryptocurrencies.