Bitcoin could fall further to $13,000 lows, a strategist warns

• Ian Harnett, co-founder of Absolute Strategy Research, said that past cryptocurrency rallies have shown that Bitcoin tends to fall by about 80% from its all-time highs.

• Such a drop in 2022 could drag the world's largest cryptocurrency down to $13,000, a "critical support level," according to Harnett.

• Cryptocurrencies are on edge as investors grapple with the fallout from rising interest rates and liquidity issues among major industry players.

If past bubbles in cryptocurrencies are any guide, Bitcoin could fall further.

According to one strategist, Bitcoin could drop to $13,000, a nearly 40% drop from current levels.

“In this environment, we would still sell these types of cryptocurrencies,” Ian Harnett, co-founder and CEO of Absolute Strategy Research, told CNBC’s “Squawk Box Europe” on Tuesday.

“It’s really a liquidity game. We don’t think it’s a currency, it’s not a commodity, and it’s certainly not a store of value.”

In explaining his bearish thinking, Harnett said that past cryptocurrency rallies have shown that Bitcoin tends to fall about 80% from its all-time highs. In 2018, for example, the cryptocurrency plummeted to nearly $3,000, after peaking at nearly $20,000 in late 2017.

Bitcoin soared to a record high of nearly $69,000 at the height of the 2021 cryptocurrency frenzy. In 2022, it moves in the opposite direction. Source: Nurphoto | Getty Images

Such a drop in 2022 “will get you back to around $13,000,” Harnett said, a “key level of support” for the coin. Bitcoin soared to an all-time high of nearly $69,000 at the height of the 2021 cryptocurrency frenzy.

“Bitcoin does very well in a world of ample liquidity,” Harnett said. “When that liquidity is drained — and that’s what central banks are doing right now — you’re going to see these markets facing extreme conditions. A lot of pressure."

The cryptocurrency world is on edge as investors grapple with the impact of higher interest rates on an asset that thrived in the era of ultra-loose monetary policy.

Last week, the Fed raised its benchmark lending rate by 75 basis points, the biggest increase since 1994. The Fed's decision followed similar moves by the Bank of England and the Swiss National Bank.

This has serious implications for digital assets. The combined value of all cryptocurrencies has plummeted by more than $350 billion over the past two weeks. Bitcoin was trading at $20,010 on Tuesday, down 5 percent over the past 24 hours. The number one cryptocurrency has lost more than half its value so far this year.

Cryptocurrency markets were already shaky even before the Federal Reserve raised interest rates last week, with the collapse of the popular stablecoin TerraUSD and its sister token Luna hurting traders' confidence.

What's more, major crypto industry players such as Celsius and Three Arrows Capital are facing severe liquidity issues, which could have a knock-on effect on the entire crypto market.

This article is compiled from CNBC

Original link: https://www.cnbc.com/2022/06/22/bitcoin-btc-price-may-tank-as-low-as-13000-strategist-warns.html