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‘Crypto winter’ and other cryptocurrency terms explained

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Yahoo Finance Lives Brad Smith explains what a ‘crypto winter’ is and what it means for investors.

Video Transcript

[MUSIC PLAYING]

BRIAN CHEUNG: The crypto space, Bitcoin hovering around $30,000, as some experts warn that a crypto winter is coming. But what does that mean exactly? Because I thought it was summer. Brad Smith is here to explain, Brad.

BRAD SMITH: Yeah, Brian, exactly. And so a crypto winter in May is what we're experiencing right now. And a crypto winter, particularly, it's essentially an extended time period of falling prices. It's not as defined as closing 20% off of the most recent highs as we would typically equate in equity markets. But think back to 2018, following the 2017 run up, where Bitcoin stopped just shy of reaching $20,000, USD at least, per BTC one Bitcoin.

Now, after that, there were some attributes that became quite clear. Number one, you had the decline of prices, but you also had low transaction volume. And then additionally, you also saw less return on mining activities. And in some instances, that can turn into unprofitability for an extended period of time if you've got certain miners that are out there trying to leverage whatever energy they can in order to convert that into mining operations to then solve whatever equations, calculations are necessary to then yield their own crypto.

And so with that in mind, we've got even more companies at this point in time that either hold crypto on their balance sheet or platforms directly engaging with the retail crypto investors. And what that does for us right now is also gives us an opportunity to hear how they're thinking about the crypto winter.

Coinbase, in their most recent earnings also acknowledging not just the last crypto winter but some investments that they've made strategically to also prepare them for this current crypto winter where we've seen prices precipitously decline from those near $70,000 levels now down most recently we've struck that low of about $27,000, $28,000.

And so as of right now, we're sitting at about, and this is taking a look at shares of Coinbase, but if we toss up Bitcoin to see exactly where we stand here on the day, we were at last check at about $29,000. There you got it right there. And so with that in mind, we are indeed in a crypto winter at this point in time. The question is, has the bottom been set in already?

AKIKO FUJITA: And Brad, there's a lot of people who are new to this space, right, who are trying to get a better sense of all the acronyms.

BRAD SMITH: All the acronyms, what you might hear what the fodder for conversation might be. And I think the overwhelming sense during a crypto winter is that everybody wants to still hold on to positivity, hold on to any type of optimism that is possible. And so with that, you hear a few different terms and acronyms time and time again.

Number one, and we've heard this even on our air, and I've got one particular example. And particularly, FUD is one of them. Fear, uncertainty, and doubt is something that all of the bullish sentiment within crypto likes to push back against. And we've got one particular instance of that within our own airwaves, and we heard that from Michael Saylor not too long ago. Take a listen.

- There is an awful lot of what folks in the crypto world called FUD.

MICHAEL SAYLOR: What's a FUD?

- Fear, uncertainty, and doubt that's out there. That's just part of it.

BRAD SMITH: So fear, uncertainty, and doubt is one of them. Another one is HODL. No doubt you've heard of hold on for dear life. That's exactly what's taking place at this point in time. Anybody who is holding on to and if they bought into crypto at, say, the $30,000 level or $35,000 level, and we know many people bought in closer to that $40,000 level as well, given the institutional inflows that we had even seen, perhaps they're holding on for dear life as they're looking at the price of Bitcoin well off of those levels. So that another acronym.

Also, WAGMI, what does it mean? W-A-G-M-I, we're all going to make it. And so that's that optimist sentiment that they're trying to make sure perpetuates beyond all of the uncertainty that certainly is in the picture right now.

BRIAN CHEUNG: There's also NGMI, by the way.

BRAD SMITH: Yes.

BRIAN CHEUNG: Not going to make it.

BRAD SMITH: Ooh.

BRIAN CHEUNG: Yeah

AKIKO FUJITA: HODL is a good one, though.

BRAD SMITH: Is that directly for the Luna folks?

BRIAN CHEUNG: No, I send that to friends whenever they want to invite me to weekend plans.

BRAD SMITH: Oh, yes.

AKIKO FUJITA: Yeah, so many of these acronyms you can apply to like real life situations. HODL is a great one. You just apply it to everything.

BRAD SMITH: WAGMI is a really good one. Any time it's like Sunday and you've got the Sunday scaries and it's like staring down another week, WAGMI. We're all going to make it y'all to the next weekend.

AKIKO FUJITA: All right, thanks for that, Brad.