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Bitcoin price plunges below $39,000 as selloff spreads to crypto

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Yahoo Finance's David Hollerith joins the Live show to discuss bitcoin's price drop, interest rates, and the outlook for cryptocurrencies.

Video Transcript

BRIAN SOZZI: Bitcoin prices are taking a bath today as pressure continues in all parts of the market, perceived to be momentum trades. Yahoo Finance cryptocurrency reporter David Hollerith is here. David, what happened here? I thought Bitcoin was headed to 100,000 this year.

DAVID HOLLERITH: Oof, yeah. So I think typically, Brian, when we look at these scenarios, we say something like, oh, you know, what did the derivatives speculators do? And right now I think it's pretty clear that the derivatives markets were not really responsible for this crash. It looks like we're sort of following fears around what happens with interest rates rising and how aggressive that might be this year.

So most investors are looking pretty anxiously at the next Federal Reserve meeting. People say that cryptocurrency, some investors say the cryptocurrency is an uncorrelated asset. I think it's proving, just as much yesterday before the crash, the correlation to the NASDAQ 100 with cryptocurrencies has never been higher. So you really can't say this is a derivatives led move. This is more so following other risk on assets.

And as we've talked about before, cryptocurrencies are higher up on the risk curve than other things. You can sort of think of it like a very high risk tech stock at this point. I mean, it's sort of what we've been talking about. But in general, we've seen about 200,000 positions liquidated in the derivatives market.

Now, most of the funding was led to the short side. So short Sellers actually had a momentum advantage in this scenario. So we can't really say that the bullish speculators are responsible for this drop. It seems like more of a sell off, just sort of staying with the risk on story that's sort of happening with other markets.

BRIAN SOZZI: David, you spend every day of your life talking to these crypto folks. Is there any sense that the selling is due for a pause in the near term?

DAVID HOLLERITH: It doesn't look like that, actually. The people I've spoken to as of this morning have said, essentially, that they expect there will be more sell offs. So Kraken, the cryptocurrency exchange, they put out their 2022 report, sort of forecasting the bull and bear case. And of course, the bull case is above $100,000, but the bear case is at $26,000.

So there's an expectation that during this sell off we could see things drop further, even at least below $35,000. So it's really hard to tell. The selling is definitely not over at this point.

BRIAN SOZZI: Well, as I said head into break, oof, the selling continues here. Yahoo Finance cryptocurrency reporter, David Hollerith. Good to see you.