OANDA Senior Market Analyst Ed Moya joins Yahoo Finance Live to discuss cryptocurrency and bitcoin price slides following Russia's invasion of Ukraine, investments in blockchain technology while crypto maintains a high-risk asset status, and digital asset market parallels to traditional equity markets.

Video Transcript

ALEXIS CHRISTOFOROUS: Welcome back. I want to take a closer look now at how the Russia-Ukraine conflict is impacting the cryptocurrency markets because we have been seeing this sell-off in Bitcoin. It's now at about $36,000. Ethereum also lower, along with the other altcoins today. For more on this, I want to bring in Ed Moya. He is senior market analyst at OANDA. So Ed, we know that at least in the short history of cryptocurrencies, investors were treating it as sort of a safe haven in the way they might run to gold during uncertain times. Why is that not happening now?

ED MOYA: Well, Bitcoin's become more of the ultimate risky asset. Right now, you're starting to see Bitcoin be more correlated with, like, the NASDAQ. And given the recent developments across the Atlantic, you're starting to see there's a tremendous amount of nervousness as far as what inflationary pressures are going to be, given the uncertainty with energy prices.

And right now, you're probably going to have, I think, a lot of investors become very concerned with Bitcoin's long-term growth prospects. There's a tremendous amount of institutional money that got on board last year where right now, they're down, and there's fears that you're going to have growth concerns that could persist if inflation does continue to run away.

So I think you have a very nervous market. And crypto is going to become an extremely even more volatile trade, where you're probably going to see that the more you have concerns that inflation is getting out of control and that you can have an aggressive Fed tightening. That is going to be the biggest risk for crypto. So right now, you're probably going to see that investors are going to be very cautious about buying crypto right now. It is off the lows, given last night's sell-off. But I think there is still a lot of nervousness that we're not done with the panic selling just yet.

ALEXIS CHRISTOFOROUS: I'd say, because more than $150 billion wiped off the entire cryptocurrency market in just the past 24 to 36 hours. To your mind, at least in the short-term, what is the biggest hurdle for the cryptocurrency markets? Is it going to be Russia-Ukraine, or is it what the Federal Reserve winds up doing with QT and interest rates?

ED MOYA: Well, I think there is some optimism that-- remember, Bitcoin has lost over half its value since hitting its record highs. And I think there is this belief that you're going to probably see there is this-- still, this long-term belief that there is massive investments coming into blockchain technologies. There is this belief that you're going to have a lot more innovation be done in the short term. So I think there's many investors that are going to remain committed to crypto. But I think over the short-term right now, it's just going to really follow its cues from US equities.

And if you continue to see stocks selling pressure, I think then you're going to probably see further downward pressure on crypto. So I think many investors are going to be focused on Fed policy. I think that's going to be the big market driver. If you see the Fed start to show some more concerns of growth and that maybe they're going to not necessarily become as aggressive as some investment banks are calling for, like, seven rate hikes, then you could see more stabilization across some of these risky assets. And then you might have more investors become a little bit more comfortable buying this dip.

But I think everyone knows crypto is extremely volatile. So you could see 10% moves in a moment's notice. So this is somewhat normal for crypto traders.

ALEXIS CHRISTOFOROUS: Yeah, not for the faint of heart for sure. But something I've noticed, Ed, is that-- and something we hadn't really seen before is the cryptocurrency markets moving in lockstep with equity markets. I'm looking at the stock market right now here in the US. And it is an incredible turnaround. I mean, the Dow is now-- has basically more than halved its earlier losses. The S&P is on the flatline. And the NASDAQ is up nearly 200 points. And we're seeing this happening with some of the major coins as well. So going forward, do you think that cryptos are going to be acting a little bit more like US equities?

ED MOYA: I think that's going to hold up over the short-term, so possibly over the next month or-- actually, over the next couple of Fed rate decisions. And I think given today's paring of losses, we have to remember a lot of that is automatic buying. You had the NASDAQ bear-- fall into bear market territory tentatively. The Dow corrected. So you automatically see buying when you see 20% or 10% discount from record high levels. So that was somewhat expected.

So I think you're going to probably see that you're going to need to see some more optimism as far as equities go. And I think this is going to be a very difficult environment, but many investors were on the sidelines. There was so many investors that were holding cash. So I think given some of these discounts, a lot of them are looking at some of these valuations. Real yields are going down again. And this is an environment that is looking attractive for some risky assets. So I think that's why you saw a big rebound in some of those equities.

And I think you'll probably see that happen with cryptos, if stocks can hold these levels and become a little bit more constructive for investors. But I think we're really just not even 24 hours following the invasion of the Ukraine. And this is going to remain a very tense situation for quite some time. So I think you should expect elevated volatility. And I think that for crypto traders, you probably want to exercise the caution of expecting bigger swings and obviously scaling into positions if you feel confident to testing those waters.

ALEXIS CHRISTOFOROUS: Yeah, speaking of volatility, the VIX index, that so-called fear gauge, the last I checked, it was at about 33. Anything above 20 usually means that there's heightened fear in the market. All right, Ed Moya, senior market analyst at OANDA, thanks so much.