If the previous cryptocurrency bubbles are any example, Bitcoin could fall much further. That’s according to one analyst, who warns that the world’s most popular cryptocurrency is likely to fall as low as $13,000, a drop of nearly 40% from current levels.
Speaking to CNBC, Ian Harnett, co-founder and chief investment officer of Absolute Strategy Research, said: “It’s really a liquidity play. What we discovered is that it’s neither a currency nor a commodity and it’s certainly not a store of value. We will continue to sell these kinds of cryptocurrencies in this environment.”
Explaining his assessment, Harnett said that past cryptocurrency rallies show that Bitcoin is trending down about 80% from its historical highs.
In 2018, for example, the cryptocurrency crashed close to $3,000 after reaching its then-peak of nearly $20,000 in late 2017.
Such a drop in 2022 “would bring it to about $13,000,” according to Harnett. Bitcoin rose to a record high of nearly $69,000 at the peak of the crypto rally in 2021.
“In a world where liquidity is abundant, Bitcoins are doing well,” Harnett said.
“When that liquidity is taken away – and that’s what central banks are doing right now – then we see these markets come under extreme pressure.”
The cryptocurrency industry is under strain as investors grapple with the impact of higher interest rates.
Recall that last week, the US Federal Reserve (Fed) raised interest rates by 75 basis points, the largest increase since 1994. The Fed’s decision was followed by similar interventions by the Bank of England and the Swiss National Bank.
This has affected cryptocurrencies. The total market capitalization of all cryptocurrencies has fallen by more than $350 billion in the last two weeks. Bitcoin has lost more than half of its value since the beginning of the year to date.
The crypto market was already in volatile territory before the Fed’s rate hike last week, with investors upset by the $60 billion collapse of the popular stablecoin terraUSD and its “brother”, luna.
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