According to one expert, the world’s most popular cryptocurrency might crash as low as $13,000, or nearly 40% below current prices.
Back to $13000
Ian Harnett, co-founder and chief investment officer of Absolute Strategy Research, said on CNBC’s “Squawk Box Europe” on Tuesday, “We would still be selling these sorts of cryptocurrencies into this climate.”
Bitcoin may be about to decline even further if previous crypto booms are any indication.
This is actually a liquidity play.
What we’ve discovered is that it’s not a store of value, a commodity, or even money.
Harnett explained his negative prediction by stating that previous cryptocurrency rallies have shown that bitcoin often declines by 80% from all-time highs.
According to Harnett, such a decline in 2022 “would take you back to roughly $13,000,” a “important support region” for the token. At the height of the 2021 cryptocurrency boom, Bitcoin reached a record high of approximately $69,000.
“The bitcoins of this world do well in a world where liquidity is abundant,” Harnett added. When that liquidity is removed, as the central banks are currently doing, you may see those markets come under tremendous pressure.
Bitcoin investors are in big trouble
The Federal Reserve increased its benchmark lending rate by 75 basis points last week, the biggest one-time increase since 1994.
The Bank of England and the Swiss National Bank then made similar actions in response to the Fed’s decision.
Before the Fed raised interest rates last week, the cryptocurrency market was already in trouble, with traders alarmed by the $60 billion collapses of well-known stablecoin terraUSD and its sister token luna.
The decline in value of a derivative token intended to be one-to-one redeemable for ether has made financial problems at significant participants in the sector, including Celsius and Three Arrows Capital, worse.
The cryptocurrency market is tense as investors consider how increasing interest rates would affect assets that grew at a time of low-interest rates.
Digital assets have suffered as a result. Over the previous two weeks, the total value of all cryptocurrencies has fallen by more than $350 billion.
Tuesday’s price of $20,010 for one bitcoin was down 5% from the previous day. The top cryptocurrency has had a year-to-date value loss of more than 50%.
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