- According to Ian Harnett, previous crypto rallies show that Bitcoin usually plunges 80 percent off its peak price.
- The crypto space is currently edgy as investors struggle with the effect of rate raises and liquidity issues from top industry participants.
Based on previous crypto bubbles, Bitcoin would still likely decline lower. That’s the view of Absolute Strategy Research CEO, Ian Harnett.
Why Bitcoin could still trade at $13,000 this year
The strategist also warned that the leading digital asset could drop 40 percent off its current price. If that happens, the BTC price would still drop to $13,000. According to him, it is likely that investors would still sell their Bitcoins in this price region.
Harnett made his opinion known during an interview with CNBC’s Squawk Box Europe on Tuesday. The strategist added that his firm’s research about Bitcoin’s price action shows that it is a liquidity play.
“What we discovered is that it is neither a commodity, a currency, nor a store of value,” Harnett added. He also said that previous crypto bubbles prove that Bitcoin usually plunges 80 percent off its peak price levels. For example, the leading digital asset plunged to $3,000 in 2018 despite hitting about $20,000 in 2017.
According to Harnett, a similar drop would likely happen again this year. Hence, investors can expect the coin’s price to drop to nearly $13,000. That price level represents the coin’s key support area. Bitcoin traded at about $69,000 at the peak of the 2021 crypto bullish run.
Harriet further said, “the Bitcoins of this world usually perform well when there is enough liquidity. However, when the central banks take the liquidity away as they have just done, the markets come under huge pressure.”
An edgy crypto world
There is tension in the crypto world as investors are struggling with the effect of increased interest rates. Hence, assets, which were performing excellently during the period of loose monetary policy, are struggling now. The US Fed increased interest rates by 75 basis points this past week.
It is its biggest rate hike in nearly three decades. Like the US Fed, the Bank of England, and the Swiss National Bank also made similar moves. This rate hike has hurt cryptocurrencies. The crypto market cap has dropped over $350 billion in the last two weeks alone. Bitcoin currently trades for $20,134 on Wednesday, down 5.5 percent over the past 24 hours.
The leading digital asset has dropped over 50 percent of its year-to-date value. Before the US Fed’s rate hike last week, the crypto market was already struggling following the collapse of the Terra network. The crash of the network’s stablecoin (UST) and native token (LUNA) caused a $60B wipe-off from the crypto market.
Top industry players such as Three Arrows Capital and Celsius are currently having liquidity issues. The reason for their struggle is the significant decline in the value of a derivative token designed to be redeemed for Ether on a 1:1 basis.