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Bitcoin's Bounce

Yahoo Finance takes a look at Bitcoin's wild ride over the past 24 hours, we examine the volatility with our Editor-at-Large, Dan Roberts.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: I want to take a look at Bitcoin, because it has been on quite a wild ride here over the last 24 hours or so. It's back above $34,000, slipped as low as just around $30,000 not too long ago. We want to bring in Dan Roberts for a little bit more on this. And, Dan, when we talk about Bitcoin, we always talk about volatility, but what was behind some of the selling yesterday and then some of the buying action that we're seeing today?

DAN SMITH: Well, there are a few things going on, right, and I think that it's important, as you mentioned, that people expect volatility. That's always been the case for cryptocurrency. And actually, more recently, according to reports, there's such a smaller limited supply of cryptocurrency, especially Bitcoin, actually in circulation, because so many big whales have rushed in that are likely to hold onto it for a while, institutional firms, that the volatility might even increase in the short term.

So this isn't unexpected, but I would add that, you know, when you see a huge surge like we saw at the end of the year and continued into the first week of this year until that correction, you're going to see some profit taking. I mean, I think everyone was watching the price rise every day for the last two weeks wondering, OK, what's the peak of this surge going to be? And we're obviously going to see some kind of correction.

Now, you know, call that a crash if you want, because at one point, it was as high as 17% down. But you know, we've seen huge surges, and we've seen crashes, and it's likely to continue to go up. But I also love to give the caveat that no one knows what'll happen next with the Bitcoin price.

There are a couple of other factors, quickly, that people have pointed to in the last week or so with this correction. One is Coinbase, which, of course, is the biggest US exchange and is planning an IPO this year, experienced some real outages amid this correction, and that's a problem. I mean, it's like Robinhood, which has had some major outages in the last two years during big stock movements.

Now some people point to the Robin-- I'm sorry, the Coinbase outage, and they say, this is a problem and it hurts the price further, because people can't sell. But other people look at it the inverse way and say, well, the outage is a problem because I want to buy during those dips. You know, I was trying to get in so I could buy more.

So, you know, I kind of balance those out, and I'm not sure that you can point to the Coinbase outages as a cause of these corrections, just maybe as an accelerant. The other thing people have pointed to is that the US dollar had really bounced back, and some people think that that correlation hurts Bitcoin. But again, you know, there's also been times where Bitcoin has behaved completely separate from equities and from fiat currencies. So I'm not sure that you can really link those permanently and say that they're tethered.

- Dan, we only got about 30 seconds. What about those poor souls, the article, I think it was in "The New York Times"? $20,000 years ago. It's worth $200 million, and he can't unlock his account. What happened?

DAN SMITH: Do not lose your private keys, your recovery passwords and your private keys, because that's it. I mean, think of your Bitcoin holdings as, they're somewhere in a spot parked. But if you don't have the keys and you don't know your license plate, that's it. You'll never get your car back.

Of course that's why a lot of customers would rather just use Coinbase, which acts as your custodian and holds your funds for you. But crypto insiders and experts say, don't do that. What if Coinbase gets hacked? So it's a trade-off.

SEANA SMITH: All right, Dan Roberts. As always, thanks for breaking down the latest for us on Bitcoin.