If you think that the global crypto market crash has finally settle and it’s the best time to buy a dip, you must hold your horses. Bitcoin, the most popular crypto currency in the world, could fall further if crypto’s past bubbles can be trusted.
One strategist claims that the world’s most popular cryptocurrency could plummet to as low as $13,000, a drop of almost 40% from its current level.
“We would still be selling these kinds of cryptocurrencies into this environment,” Ian Harnett, co-founder and chief investment officer of Absolute Strategy Research, told CNBC’s “Squawk Box Europe” Tuesday.
Harnett believes that it is a liquidity play, as it is neither a currency nor a commodity, and definitely not a store or value.
Bitcoin has already fallen around 70% since its all-time highs in November last year when it was trading at around $69,000. Currently, Bitcoin is crashed to $20,173 and people are still skeptical about it sustaining the level before it start moving up.
The reason behind such scepticism is simple. Bitcoin has been very volatile. After reaching a peak of almost $20,000 in 2017, the cryptocurrency plunged to near $3,000 in 2018.
Harnett said that such a drop in 2022 would “take you back to around $13,000,” which is a key support area for the token. At the height of the 2021 crypto frenzy, Bitcoin reached a record high of almost $69,000 in November 2021.
Harnett stated that bitcoins do well in a world of liquidity. “When liquidity is removed — and that’s exactly what central banks are doing right now — you will see these markets coming under extreme pressure.”
As investors consider the effects of higher interest rates for assets that have been thriving in an era with ultra-loose money policy, the crypto world is on edge.
The Federal Reserve increased its benchmark lending rate by 75bps last week. This is the largest single increase since 1994. Similar moves were made by the Bank of England, and the Swiss National Bank to follow up the Fed’s decision.
This has had a negative impact on digital assets. In the last two weeks alone, the total value of all cryptocurrency fell to more than $350 Billion. Since its peak in 2021, more than $2 trillion has been wiped off from the global cryptocurrency market. According to Coinmarketcap, the market capitalisation of cryptocurrencies reached the peak of $2,977 billion on November 10, just $23 billion short of $3 trillion. Since then, the value of cryptocurrencies has been tumbling down and has reached to $977 billion, recording a fall of over $2 trillion in the last 6 months.
Before the Fed raised its rate last week, the crypto market was already in trouble. Traders were upset by the $60 Billion collapse of the popular stablecoin TerraUSD and its sister token luna.
The fall in value of a derivative token that was one-to-one redeemable for ether has worsen the situation for major industry players such as Celsius and Three Arrows Capital.