Bitcoin tumbles leading to bigger cryptocurrency losses

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Yahoo Finance Live’s Brian Sozzi and Julie Hyman discuss the volatile nature of bitcoin as the cryptocurrency and other digital assets see price drops.

Video transcript

JULIE HYMAN: That’s not necessarily good news either, if you’re a crypto bull. [INAUDIBLE] looking at year-end performance here. We have seen, across the board, that cryptocurrencies are trading lower and Bitcoin is on course for its worst monthly performance since May.

And Brian Sozzi, as I look around this morning, there are a number of different explanations, as is usually the case, when it comes to Bitcoin. Many of them are technical. There has been some discussion of options activity, options that are due to expire on Friday.

And CoinDesk reports that Bitcoin tends to move towards the maximum [INAUDIBLE] leading point until an expiry of the size we see on Friday. There is also talk of leveraged positions in cryptocurrencies, and Bitcoin in particular, and this can also exacerbate selling. So it’s always worth trying to look through the hood as much as possible when it comes to some of these cryptocurrency moves.

BRIAN SOZZI: If there’s a saving grace here, Julie, it’s that we haven’t seen that day where everything dips. I know bitcoin fell around 7% yesterday, fell below that 50,000 mark, but I still don’t see this rout in bitcoin and other cryptos happening in one session. So that’s fine, but again, it could be painful if you’ve been long Bitcoin all year, and now you’ve been caught in this rout.

And Julie, it’s not just the cryptoverse and the tokens or coins themselves, it’s really some of the actions. And I’m just looking at my notes here. Riot Blockchain is down around 36% so far this month. You have Coinbase down 13%. Robinhood has been completely down, down almost 40% in the past month, largely due to these crypto exposures.

But I still don’t see any catches or chatter there, Julie, that suddenly Bitcoin is going to disappear or that some of these other coins, like Dogecoin, are disappearing. I think we can all agree that Bitcoin and other cryptos are here to stay. It’s just a matter, perhaps, of cleaning up a year-end portfolio. And maybe, you know, that momentum, or the sell, will change when the timing changes.

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JULIE HYMAN: Yeah, there’s a lot of discussion within the crypto community about whether the traditional four-year Bitcoin cycle that we’ve seen mimics other cryptocurrencies to some degree, if that four-year cycle is broken, if we’re going to see some sort of rejigging or overhaul of how crypto exchanges work, especially with the increased institutional support we’ve seen this year. But you know, it’s a waiting situation.

As for Coinbase, I just wanted to focus on that one in particular for a minute because it’s sort of emblematic of what we’ve seen, not just crypto, but some of the silver stocks hot that we watched this year. And I was just looking at some of the stats this morning.

So Coinbase, its first day of trading was back on April 14. It wasn’t an initial public offering, remember. It was a direct quote and the shares closed that first day at around 328. So now you see it’s trading at 261. And again that reflects the crypto and the kind of rollover we’ve seen, but it’s also mirroring what we’ve seen in terms of IPOs.

We’ll talk more about that on the show, Sozz, but “The Wall Street Journal” reports this morning that 2/3 of all launches this year are trading below those IPO or launch prices. And Coinbase is just one example. There are many others.

BRIAN SOZZI: I’m feeling a bit optimistic, Julie. So I’m going to take the other side of this. I should think that at some point you will soon see buyers emerge like Robinhood and Coinbase. And I understand the overall risk and I understand that, you know, earnings are likely to be under pressure in the short term.

But at their core, they’re very impressive platforms, Julie, with companies that have built companies that have pretty wide moats around their business, IMHO. At some point, you’d think buyers would step in here and start giving reviews on deserving companies. I would say that we are reaching a point where the valuations of these companies no longer correspond to their future potential.

JULIE HYMAN: In both directions, maybe again, for some of them.

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