Bitcoin price worst-case scenario is a $14,000 bottom, strategist says

Yahoo Finance's David Hollerith joins the Live show to discuss bitcoin's recent price drop, the cryptocurrency’s correlation with equities, and one strategist's note on where bitcoin could go from here.

Video Transcript


BRIAN SOZZI: Bitcoin prices are climbing off their recent lows. But the buying hardly looks convincing. Yahoo Finance's cryptocurrency reporter David Hollerith is here. David, you continue to be on the pulse of all thing crypto prices. What are you hearing this morning?

DAVID HOLLERITH: Yeah, so, you know, I'm hearing, Brian, primarily that there's been a rebound that was sort of talked about over the weekend. And, you know, everything's sort of still hinging this week on what, sort of, the words that come from the Fed. So the market is heavily tuned in to what the Fed's doing.

You've heard this a couple of times already. There's a strong correlation with risk on equities. But, you know, seeing such a drawdown below 40k, I sort of, over the weekend, I started doing-- I just spoke to a lot of different analysts and investors. And I got one forecast for BTC in the long term, over maybe the course of the next year, that was actually quite bearish.

And so, the analyst I spoke to is an independent analyst. He's had a fairly long career. He has not, you know, he doesn't work in the crypto space. But he used Bitcoin's four year halving cycle, based on past historical prices, to sort of calculate where the bottom from peak is. So he made a few assumptions.

One is that the Federal Reserve successfully combats inflation over-- or central banks more broadly successfully combat inflation over the next year. Also, he assumed that Bitcoin is primarily seen as an inflation hedge by investors, meaning that an environment where inflation is being tamed will diminish its value somewhat.

So, although he is actually long term optimistic about Bitcoin, he calculated, just based on past historical prices, from the past two cycles it's had, that the price could fall down to below $14,000. And that's sort of based on the past two drops, which are 80% from peak to bottom. So there are a few assumptions going on here. And I'm happy to sort of talk through it.

BRIAN SOZZI: Well, David, I want to get your reaction to this. I talked to American Express' CEO Stephen Squeri this morning. And I would characterize him as not a Bitcoin bull. But look what he said-- look what he told us. Quote, I've said from the beginning, cryptocurrencies are really an asset class, like gold or silver. Look at Bitcoin, which is a good bellwether, it's down 50% in two months. How do you call it a currency?

Do you have-- when you talk to your sources, do you hear them saying that, you know, maybe it's not an asset class, or it's not a currency? Do you hear any-- hear any just change in tone from them?

DAVID HOLLERITH: Yeah, you know, I think that everybody is sort of bugged by the risk on correlation with equities. Because in the past, before such a high level of institutional adoption happened, that wasn't the case. So since the pandemic, there's been so much economic stimulus in the markets. It's sort of a-- it sort of changed that trajectory a little bit.

And whether or not that continues, I think we'll be remain-- we'll have to sort of see. But, you know, for Bitcoin, a lot of people view it as this store of value, inflation hedge. And obviously, it sort of changed. Because it's seen such massive gains. But, you know, it can be viewed, in some ways, if it's an inflation hedge, it can be viewed sort of as a corollary for bonds, as odd as that sounds.

I know Ray Dalio pointed that out a little while back. It's also sort of an asset that is potentially going further down the risk curve, in terms of the level of adoption we're seeing. So these corporations and nations that are potentially putting it on their balance sheet, in some ways, there's an argument to be made that it's stabilizing the cryptocurrency more.

So Bitcoin is very different from the other cryptocurrencies. And that's mainly due to adoption and how it's being viewed. But I think that, at the end of the day, you know, it's still sort of this-- it's this asset where people will look to it, and it has certain properties. But, essentially, you can kind of make what you want out of it.

BRIAN SOZZI: Yeah, that much is for sure. All right, we'll leave it there. David Hollerith, thanks so much.