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Crypto: Why bitcoin and ethereum are driving higher

Yahoo Finance's David Hollerith joins the Live show to discuss bitcoin hovering near $23,000, inflation, the strength of the U.S. dollar, and the outlook for crypto investor interest.

Video transcript

JULIE HYMAN: Let's also talk about what's happening in crypto today, because we have been watching Bitcoin after it saw a big monthly gain last month, along with other risk assets, right? We saw Bitcoin rise almost 24% in July. That was its biggest monthly rise since October of 2021.

A little bit of a pullback today, but still above 23,000. David Hollerith, we caught up with him a little while about what's going on in price wise with Bitcoin. So what's the latest chatter here around what's going to happen now David?

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DAVID HOLLERITH: Well, I think if we're going off of what a lot of traders were saying to me last week, it's that cryptocurrencies are very much still a macro-driven risk on asset. So likely what we're going to see is these movements are going for cryptocurrencies, Bitcoin in particular are going to hinge on the data-driven narrative that Powell has explained the Federal Reserve will use for gauging what to do about monetary policy, going forward. So from that scenario, what looks to be two major events for cryptocurrencies, more broadly would be something like the consumer index price release, and then the jobs reports. Two sides of how the Fed will be thinking about inflation.

Now added to that, though, I think another thing to point out outside of the interest rate increase, which was largely expected last week by the market, the strength of the US dollar really does define these assets. And interestingly, on July 13th, the US dollar strength peaked. And since then it's been going down by about 2% as of now, and that was the same day that Bitcoin actually bottomed out. So to some degree, if we're just looking at cryptocurrencies at a much broader level to how they relate to other assets, we can just see the US dollar index going down. And we can get an understanding that risk assets, like cryptocurrencies, are expected to improve in this scenario.

BRIAN SOZZI: And David, just given the movement higher we've seen in cryptos, is there any one hot area of the market you're focused in on?

DAVID HOLLERITH: Yeah, Ether has looked particularly bullish. We all call out Bulls in this type of market. Obviously Ether and Bitcoin are both still trading well below their 200-day moving averages. But Ether has this whole narrative around their software transition from proof of work to proof of stake.

And the developers who are behind all of that have come out with a stronger narrative in terms of giving reports for these dress rehearsal tests leading up to it. And they've actually set a soft date for the transition to begin, finish in the week of September 19th. So obviously crypto investors love a narrative of something actually happening in the industry that could signify more improvement in terms of innovation.

And really there are a lot of questions about the Ether merge and what that will mean for the cryptocurrency. But one definite one is that it's energy consumption, the Ethereum blockchain will reduce by 90%. So that's a big win that Ethereum proponents are certainly touting now.

BRIAN SOZZI: David Hollerith with his pulse on All Things Crypto Thanks so much.