Crypto: 3 trends magnifying Bitcoin's recent slide, Ethereum core developer talks innovation

Yahoo Finance's Jennifer Schonberger sits down with Ethereum Core Developer Lane Rettig to put cryptocurrency volatility into focus as bitcoin and ethereum continue to fine-tune their platforms amid erratic trading periods.

Video transcript

- Bitcoin is slowly clawing its way back trading above the $49,000 price handle after a massive sell off this weekend that saw the largest crypto asset fall nearly 20% in a span of 24 hours. Let's bring in Yahoo Finance's Jennifer Schonberger who's tracking that for us. And Jen you know we've come used to these big swings in this space, but how much of this was just about what we saw with the rest of the market, which is just this risk off sentiment setting in.

JENNIFER SCHONBERGER: Hey there, hey there Akiko. Yeah Bitcoin certainly living up to its name and reputation as far as volatility. Isn't it? The cryptocurrency though stabilizing as you mentioned around that 49,000 level after plunging some 20% on Saturday. Let's take a look at the chart here. I want to take you back to Friday.

On Friday, Bitcoin was trading around 57,000 started losing altitude along with those other risk assets that leg lower accelerating on Saturday falling 20% to below 43,000 before stabilizing on Sunday and into today. And then if you look back, this weekend's crash following after just over a week ago on Black Friday, Bitcoin point into a bear market that on the back of fears when we first learn about the Omicron variant.

This time around the drawdown being driven by a number of factors. One, the Federal Reserve tightening monetary policy in the face of inflation. Two, fears about the impact of Omicron on global growth and three, you're seeing liquidation in the crypto derivatives market. So that is magnifying these moves downward just as we saw in the financial crisis or any time you see a major drawdown in equities, those moves can sometimes be amplified by algorithms.

By those derivatives, the same sort of action happening with Bitcoin in the crypto market. But today, Bitcoin getting a bit of a bid along with the other risk assets as it appears that perhaps the symptoms at this point for Omicron seem to be more mild although it is early innings.

The CEO of Valkyrie funds Leah Wald told me, quote, Bitcoin and other digital asset markets selling off after equities is a well-established pattern. When traders see uncertainty they sell riskier assets and often sit on cash until they have clarity, this time was no exception.

What's different about crypto markets than traditional markets is the amount of leverage being used by many unsophisticated participants, which leads to cascading liquidations that exacerbate steep declines amplifying them many times over. Now she also tells me that Ethereum held up remarkably well during the Bitcoin crash this weekend. And that could be a harbinger for the second largest cryptocurrency as we move into the new year. Akiko.

- And Jen that is a perfect segue way into your interview. I know you had a chance to sit one on one or speak one on one with one of the core developers of Ethereum. What did he tell you about just the explosive growth we've seen in the space?

JENNIFER SCHONBERGER: Yeah Akiko for all of the gyrations and the bear market that we just seen in Bitcoin, he actually told me he thinks that Bitcoin could eventually reach a million dollars a coin. I had the opportunity to speak exclusively with Lane Rettig a former core developer of Ethereum.

We talked about everything from price action to the future of crypto and Ethereum, he thinks that crypto is going to severely touch every single part of our lives. It could change the way businesses are formed, our salaries are paid out to us and the way we purchase tickets. Take a listen to this interview.

LANE RETTIG: Yeah I think my outlook for the long term is extremely positive. I think it has been that way for certainly the four years that I've been in the space. I think if anything it's gotten a little bit faster. It's been more accelerated and sort of begun this process of mass adoption a bit faster than we thought. You know I think it's it's really a very transformative set of ideas and technologies that are going to change the way we conduct business, the way we transact and in particular the ways that we people come together coordinate, start businesses on a small scale and a large scale.

JENNIFER SCHONBERGER: So where are we with crypto right now? How early in the innings are we and how much of this could be really integrated into our daily lives as far as mass adoption? Right? Right now we're starting to see debit cards, credit cards that are linked to crypto.

LANE RETTIG: I think it's super early. I think some folks might say we're somewhere in the third of the fourth inning. If you ask me it's kind of like top of the second bottom of the second inning So it's really really early days, you know another metaphor I like to use is where somewhere like where personal computing was in the mid to late 70s. Right?

So kind of the Apple Macintosh computer hasn't come out yet, which is to say that you know the usability is not quite there, but we're getting there very rapidly. And yeah I mean, you mentioned debit cards applications like that. I'm finding myself doing more and more of my day to day life either entirely in crypto or partially in crypto in the sense that we have large companies that are acting as bridges now that allow us to transact in the dollar world using crypto assets.

Things like that. I don't think that there's any area of our lives that's not going to touch and I think you know maybe a little bit late for us. But I think that our children are going to grow up in a world where they don't have traditional bank accounts. They have crypto accounts.

LANE RETTIG: All right. Well let's talk about that a little bit more because Ethereum is certainly gaining ground. The majority of projects now being built on the Ethereum blockchain certainly, NFTs most of them use Ethereum. What do you see as the best use cases for Ethereum as we go forward from here?

LANE RETTIG: OK that's an excellent question. I think it's also a very good time to have this conversation because a lot of this has developed very rapidly over the past year. Like I'm not sure I would have had a really good answer to your question a year or two ago. Now I like to talk about the big three.

And I think these are three incontrovertible, like indisputable value positive use cases for Ethereum and another smart contract platforms but primarily Ethereum. The first is stablecoins which are these cryptographic tokens that are not volatile, they don't swing wildly the way that assets like Bitcoin and Ether do.

The second is NFT is I think a lot of your listeners will be familiar with NFTs, we're seeing digitization of art and a lot of other types of assets. And the third case, is those which are a little bit harder to explain, but this idea of these decentralized autonomous organizations, groups of people who might live in the same place or they might be spread out around the world coming together and creating these almost like company-like structures, where they can share assets and build interesting kind of governance systems. And use these to build products and services.

JENNIFER SCHONBERGER: And you also think that this could sort of change the way that companies are formed. Right?

LANE RETTIG: Yeah, absolutely I think that there's this idea of virtualization in computing. Right? And this made it much cheaper and much easier to create a tech startup in let's say the 2000s than it was in the 90s. Right? In the 90s you needed a million dollars of capital you need a physical room hosting a bunch of physical servers to build anything. And then cloud computing came along and made it much easier, faster, cheaper to spin up a startup and a set of infrastructure for an application.

I think that those are going to have the same impact on business and kind of ventures and collaboration in the sense that, whereas it's a very slow complicated process to kind of raise funds and traditional channels and hire lawyers. A DAO can be spun up in a matter of minutes or seconds very very cheaply.

JENNIFER SCHONBERGER: Let's talk about NFTs. We're starting to see them applied in the music industry, movies, gaming, sports, and it's certainly creating new forms of revenue streams for those industries. How do you see the application of NFTs evolving? Do you think we could see it being translated to records for instance like deeds for homes, passports. I just heard that MIT is offering diplomas in the form of NFTs.

LANE RETTIG: Yeah, I think this is one of the most exciting developments in this space in the past couple of years. And one of the most exciting trends. I think the really short answer to your question is that I see all things being digitized and I think that that's to the extent that we're moving into a digitally native metaverse world. It kind of makes sense because things need a digital representation to to be able to exist in an metaverse.

You know just to use one concrete example here. One of my favorite examples of where NFTs can move the needle is let's talk about music and records. Right? I can't tell you how often I'm browsing music on a platform like Spotify or YouTube and I find an artist that I haven't heard before and I'm really into into their music and I want to follow that artist, but I want to do more. I want to kind of invest in that artist and maybe even in an NFT world, I can sort of own a stake in the future revenue stream associated with a particular song. Which I think is very exciting that's something that can't happen without this sort of technology.

JENNIFER SCHONBERGER: And the second half of that interview will run this afternoon in the 1:00 PM hour. So stay tuned for more on that. Back to you.

- OK certainly looking forward to it our viewers can also see the full interview on our website yahoofinance.com. Jen Schonberger appreciate you bringing us that interview.