Crypto: Bitcoin bounces back over $30,000, tether pays out $10 billion

Yahoo Finance's David Hollerith reports on the latest in the cryptocurrency markets as bitcoin searches for a bottom and tether looks to rebuild trust in stablecoins.

Video transcript

JARED BLIKRE: As to Bitcoin and the Crypto Corner, it is back above $30,000 after dropping for seven straight weeks, not unlike stocks. And Yahoo Finance's David Hollerith, he joins us with a check on crypto. David, great to see you back here.

DAVID HOLLERITH: That's right, Jared. So the global crypto market cap on the day is up almost 1%, which if anyone's been paying attention to the cryptocurrency markets for the last several weeks is something we'll take exactly. I mean, the current market cap stands at $1.29 trillion, which, of course, has fallen significantly.

Now, the two main trends which have sort of been the consequence and sort of catalysts of the fall have been, one, the tightening macro conditions, which you have mentioned, and then also the collapse of the UST stablecoin or Terra.

So, you know, for Bitcoin what that means is that lately it's been hovering around that $30,000 price mark. Over the weekend it dropped again. In the last two days, it has rebounded. And I think that, you know, the question that still remains is, you know, have cryptocurrencies hit bottom or do they have further to go?

Now if you're going off of sort of saying that the collapse of the stablecoin Terra has been sort of the primary driver of the recent fallout, a lot of people might say something like, you know, maybe we're seeing sort of an end to this or maybe things are at least stabilizing.

But that being said, if you're following the macro narrative-- which Bitcoin traditionally trades on a macro narrative, although it is heavily influenced by cryptocurrency prices and what's going on with assets that are somehow linked. A lot of people would say if the S&P or the NASDAQ especially has further to fall, we should expect more losses in the next several weeks.

That being said, the correlation between Bitcoin and stocks is still very high, but it has fallen in recent weeks, which is most notably due to the fact that, you know, we've seen this huge shakeout in all cryptocurrencies prices, primarily driven by this narrative exclusive from stocks around the Terra USD Coin.

JULIE HYMAN: And as we talk about stablecoins and so-called stablecoins, I want to ask you about Tether too, which is a stablecoin but it's a very different kind of stablecoin from what we saw happen with Terra because it's not an algorithmic stablecoin. It is backed up by actual assets.

That said, it seems like people have been spooked in that market too. $10 billion has been pulled from Tether, I believe, over the past week or so. And, you know, I don't-- and I don't know how they maintain the peg when you have all that money flowing out.

DAVID HOLLERITH: Yeah, you know, it's a good question. You know, you have on the one hand, to sort of lump it into these two groups, you have a strong group of Tether supporters. And just to give some background, Tether is sort of seen in some ways as the unofficial central bank of the crypto sector just due to how much money is in it. Before we saw this shakeout, there was about 83-- its circulating market cap was about $83 billion. So it has a ton of money in it, and a lot of people make the argument that a lot of what backs Bitcoin is the price of Tether and how liquid it is.

That being said, they do release quarterly attestations which give people an idea of how they back up their reserves. Now unlike Terra, which actually was the second-largest holder of Bitcoin before it had to sell off those assets to sort of defend its price peg before it collapsed, Tether backs its reserves in much more secure, relatively speaking, government debt, most often US Treasury bills.

But that being said, Tether has for years been scrutinized by regulators and critics in the sector for also holding commercial paper. And then these added attestation reports, which are, you know, generally the most transparency people get around Tether, have-- you know, they come out once a quarter, which most of the critics say is not soon enough, and it is further behind other stablecoins.

Sort of the second-largest stablecoin, USD Coin-- Circle issues this stablecoin. They report much more regularly. They're also-- their assets are managed by BlackRock, which has been sort of a recent development.

So, you know, as we've seen the drop in Tether's market cap happen, we've seen about $5 billion go into USD Coin. So that is partly where we could be seeing stablecoin or at least investors putting-- moving their money from one stablecoin to another.

But that being said, I think there's definitely a portion of the money from Tether that has probably exited the asset class given just sort of the risk-off sentiment we've seen and a general, you know, I would say just skepticism that's sort of come back to cryptocurrency since we've seen this big boom in the last year.

JARED BLIKRE: Yeah, definitely hearing rising a growing chorus of crypto deniers, but I'll tell you what solves that, higher prices. We'll have to see what comes of that.

Thank you for that report, Yahoo Finance's David Hollerith.