If crypto’s past bubbles
are anything to go by, bitcoin could be about to fall much further.
That’s according to one strategist, who warns the world’s top
cryptocurrency is likely to tank as low as $13,000 — an almost 40% drop from
current levels.
“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.
“It really is a liquidity play. What we’ve found is it’s neither
a currency, nor a commodity and certainly not a store of value.”
Explaining his bearish call, Harnett said past crypto rallies
show bitcoin tends to fall roughly 80% from all-time highs. In 2018, for
instance, the cryptocurrency plummeted close to $3,000 after hitting a peak of
nearly $20,000 in late 2017.
Such a drop in 2022 “would take you back to about $13,000,” a
“key support area” for the token, according to Harnett. Bitcoin rose to
a record high of nearly $69,000 at the height of the 2021 crypto
frenzy.
“In a world where liquidity is plentiful, the bitcoins of this
world do well,” Harnett said. “When that liquidity is taken away — and that’s
what the central banks are doing at the moment — then you see those markets
come under extreme pressure.”
The crypto world is on
edge as investors grapple with the impact of higher interest rates on assets
that flourished in an era of ultra-loose monetary policy.
Last week, the Federal Reserve raised its benchmark lending rate
by 75 basis points, its largest single hike since 1994. The decision from the
Fed was followed up with similar moves from the Bank of England and the Swiss
National Bank.
That’s taken its toll on digital assets. The combined value of
all cryptocurrencies plunged more than $350 billion in the past two weeks.
Bitcoin was trading at a price of $20,010 Tuesday, down 5% in the last 24
hours. The No. 1 crypto has lost more than half of its value year-to-date.
The crypto market was already on shaky ground before the Fed’s
rate hike last week, with traders roiled by the $60 billion
collapse of popular stablecoin terraUSD and its sister token luna.
To further complicate matters, the fall in the value of
a derivative token designed to be one-to-one redeemable for
ether has exacerbated financial troubles at major industry
players like Celsius and Three Arrows Capital.
Source:CNBC