Crypto: Why the price of bitcoin is falling

Yahoo Finance's David Hollerith breaks down how bitcoin continues to fall as stocks sink.

Video transcript

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- The bearishness persists in crypto land. Bitcoin fell below 40,000 this morning with some now pointing to a death cross for the crypto forming on the charts is one reason for the decline. Yahoo Finance's cryptocurrency reporter David Hollerith is here with the details. David, ugly starts the week, but really it's been an ugly few weeks for Bitcoin. David, I think you're on mute.

DAVID HOLLERITH: Since November, when we saw all the prices of crypto assets peak, you know, it's been a general drawdown. One interesting trend that we've also seen concurrently with the drawdown in cryptocurrency prices has been sort of an increase in the supply of stablecoins. For example, USDC, the second largest stablecoin has increased by about almost 700% in the last week. So what we're seeing right now is a lot of investors, crypto investors are moving into stablecoins as a way to hedge out some of the volatility that's going on right now.

The Bitcoin price is testing around $40,000. Ethereum tests at the $3,000 level. So, again, the top two cryptocurrencies are trading even lower this week, and they're following sort of a more risk-on story that is what we're seeing in the stock market more generally.

- And, David, you know, what are the crypto faithful kind of saying about this latest downdraft, right, because no matter what happens with, with Bitcoin, with Ethereum, with the rest, you really have a pretty sizable core of people who are bulls out there, who will say this too shall pass?

DAVID HOLLERITH: Yeah, you know, I think that the realistic crypto faithful are sort of thinking of this as a sort of a time to hold out. You know, people have even-- you know, they're acknowledging the fact that cryptocurrencies have traded risk on since the pandemic. And one trend that was kind of interesting was the relationship between the Bitcoin price and the 10-year Treasury yield. Now they were sort of moving in a lockstep fashion for the past year. And as of January 3, so at the beginning of last week, they sort of diverged.

And so a lot of cryptocurrency investors were sort of hoping that this was some sort of signal. An analyst I spoke to is indicated that it's probably been a reflection of the fact that the 10-year yield, up to this point, hasn't really signaled Federal Reserve movements as much as just the heating of the economy without Federal Reserve sort of signaling concerns over inflation. So now that's changed, I think that we're expecting over the short-term and near-term and most crypto investors who are taking these drawdowns seriously are saying, in the near-term and short-term they expect to continue drawdown, but nothing like 2018 is sort of the going word. So they're not expecting you know, a multi-length or year long bear market at this point.

- Point well-taken. Yahoo Finance's David Hollerith, good to see you.