Bitcoin could plunge even further to a low of $13,000, one strategist warns.
If crypto’s past bubbles are anything to go by, bitcoin could fall much further.
That’s according to one strategist, who is warning that the world’s top cryptocurrency could drop as low as $13,000 – about 40% below current levels.
“We are still selling these kinds of cryptocurrencies in this environment,” Ian Harnett, co-founder and chief investment officer of Absolute Strategy Research, told CNBC’s “Squawk Box Europe” on Tuesday.
“It is really a liquidity game. What we have found is neither a currency, nor a commodity, and certainly not a store of value.”
Elaborating on his bearish call, Harnett said that past crypto rallies show bitcoin has fallen by about 80% from all-time highs. For example, in 2018, the cryptocurrency fell near $3,000 after peaking around $20,000 in late 2017.
According to Harnett, such a drop in 2022 “will take you to around $13,000,” a “key support zone” for the coin. Bitcoin hit a record high of around $69,000 at the height of the 2021 crypto craze.
“The bitcoins of this world do well in a world where liquidity is plentiful,” Harnett said. “When that liquidity is removed – and that’s what central banks are doing right now – then you see those markets are under immense pressure.”
The crypto world is on edge as investors grapple with the impact of high interest rates on assets that have flourished in an era of ultra-lax monetary policy.
Last week, the Federal Reserve raised its benchmark lending rate by 75 basis points, its biggest single increase since 1994. Following the Fed’s decision, similar steps were taken by the Bank of England and the Swiss National Bank.
This has had an impact on digital assets. The combined value of all cryptocurrencies has fallen by over $350 billion in the past two weeks. Bitcoin was trading at a price of $21,393 on Tuesday, up 6% over the past 24 hours but still down more than 50% year-on-year.
The crypto market was already volatile ahead of the Fed’s rate hike last week, with traders rattled by the $60 billion collapse of the popular stablecoin TeraUSD and its sister token Luna.
To complicate matters further, the drop in value of derivative tokens designed to be redeemed one-to-one for ether has added to financial trouble for major industry players such as Celsius and Three Arrows Capital.