Yahoo Finance's David Hollerith explains what's driving bitcoin's price action as the crypto hovers below $30,000.

Video Transcript

[MUSIC PLAYING]

SEANA SMITH: Pain in crypto. Bitcoin is in the red once again today, trading below a 30,000. It's off 23% in just the last month alone. Now, despite this sell off and some of the pessimism surrounding crypto, JPMorgan actually sees, quote, "significant upside," calling for a rally of nearly 30%. Yahoo Finance's David Hollerith joining us. And David, we certainly have seen a number of these cryptocurrencies sell off in recent weeks. But there's still a reason, or at least Wall Street is finding reason to stay optimistic.

DAVID HOLLERITH: Yeah, Seana, just to retrace the last couple of movements we've seen, after the Fed's FOMC minutes released yesterday, we saw a slight crypto rally. That was cut short this morning. Generally since then, we've seen major drawdowns as of the second half of May. And the crypto market has kind of cooled in that area.

There's been a little bit of what you call flight quality, Bitcoin most of all. Ethereum, the second-largest cryptocurrency has sold off worse on the day. And that's been mostly due to technical hurdles and limitations that are sort of coming out right now with regards to its epic move to proof of stake. Now, on the contrarian side, a JPMorgan analyst published a research note on Wednesday that pointed to Bitcoin's being undervalued. So given the fact that Bitcoin's volatility relative to gold has slightly diminished recently, they approximated that Bitcoin should be worth about $38,000. So about a $10,000 undervalue by the market is sort of what they've been saying.

- And David, I want to talk to you about Luna because the last time we spoke about them, everyone was pretty much wringing their hands, thinking this thing is dead in the water. But now we're hearing word about a revival. What can you tell us?

DAVID HOLLERITH: Yeah, after succumbing to what Wall Street calls a death spiral, the stablecoin Terra USD, or more broadly the Terra ecosystem, is coming back and is set to launch actually tomorrow. So a proposal for the ecosystem Resurrection by the founder, Do Kwon, has been approved by the community. And the idea of the proposal is that it will split the original Terra blockchain into two separate structures.

The Terra, the older blockchain structure, will be known as Terra Classic. And this new one, which will take on the ticker for its native cryptocurrency, Luna, will be known as Terra 2.0 and Luna 2.0. But if you're looking at it on something like Yahoo Finance's chart page, you'll see it just as Luna or Terra perhaps.

So an interesting add to this is that a number of cryptocurrency exchanges, including Huobi, Bitfinex, and Bybit, have all agreed to relist the cryptocurrency. So, you know, I think it's just pretty interesting because the question is, what's going on here? And I think you can look at it two ways.

One is that, you know, there's an opportunity for the founders to find a way to sort of resurrect the project and at least give investors who were sort of trapped before the collapse and couldn't sell, give them a chance to get back some breadcrumbs on their original investment. Otherwise, you know, I think that there's a community of developers here, too, who want to continue to build. And so that's something they're trying preserve. But, you know, the question remains obviously is, who will be the buyer of something like this?

SEANA SMITH: Yeah, you think people will be a little bit nervous before they jump in this time. David Hollerith, thanks so much.