- The crypto market has lost a quarter of its value since President Donald Trump was inaugurated.
- Market analysts point to a number of forces at work.
- Arthur Hayes sets $70,000 as new floor.
The floor at last. Maybe.
Stabilising after a 2.6% slide over the last seven days, Bitcoin on Tuesday hovered at $81,000 in late-afternoon trading UK time.
Yet the respite may be brief given President Donald Trump’s trade war on Canada, Mexico, and China, and mounting fears the US could be backsliding into a recession.
The crypto market has lost a quarter of its value since Trump was inaugurated on January 20.
Even worse, it has tumbled despite the White House’s quick work on ending a regulatory crackdown plus forming a national Bitcoin strategic reserve.
Here’s what market experts say may happen next:
Mena Theodorou, Co-founder at crypto exchange Coinstash
Bitcoin may be hailed as a form of digital gold that stores value but unlike the metal the top cryptocurrency marches in lockstep with stocks.
“The crypto market is mirroring traditional markets,” Theodorou wrote in a memo.
“Bitcoin is moving with equities, an example of its role as a macro-sensitive asset rather than a pure hedge.”
Indeed, the problem is that stocks and bonds are driven by macroeconomic forces such as interest rates and economic growth, or the lack thereof.
Now so does crypto.
Given how the the S&P 500 Index has erased all its gains since Trump won election on November 5, Bitcoin could have further to fall.
Theodorou, for one, predicts it could slide below $70,000.
“I seems likely Bitcoin will retest its next major support level, around $69k, which also marks [a] previous all-time high,” he said.
Chris Mills and David Brickell, aka London Crypto Club
The two analysts agree that Bitcoin’s penchant for tracking the stock market does not bode well in the months to come.
“Bitcoin’s short-term correlation to risk looks set to keep volatility high,” Brickell and Mills wrote in a blog post.
They explained that as equities like tech stocks continue to bleed, so will Bitcoin. This is because crypto is considered a “risk-on” asset class.
Trump’s waffling on tariffs for the US’s top trading partners won’t help, Mills and Brickell said.
“The policy uncertainty continues to weigh on investor sentiment, which is also feeding the US growth concerns.”
Still, the Trump administration’s establishment of a Bitcoin strategic reserve is positive.
“This validates Bitcoin as an asset class and the ramifications run wider than just the US,” they said.
Mark Hiriart, Head of Sales at Zerocap
A Fed rate cut would be most welcome for investors in risk-on assets like stocks and cryptocurrencies.
Even that may not be enough to counter the fear in the market as trade wars and economic instability take their toll.
“Sticky inflation and tariff threats are fuelling a flight to safety,” Hiriart said in a note to clients.
“BTC is not the hedge people hoped — it’s bleeding [alongside] tech stocks.”
Hiriart sees a silver lining, however.
“Bitcoin’s dips have historically been ‘golden buying opportunities,” he said.
“Weathering this storm with patience could pay off, especially if $75,000 holds as a floor.
“Trump’s policies will keep volatility high, but the long-term bullish case remains intact for those who accumulate now.”
Arthur Hayes, co-founder of BitMEX
Hayes summed up his analysis quite neatly on Monday: “Be fucking patient.”
Hayes, the co-founder of BitMEX and crypto influencer, proved prescient in this latest round of volatility. Earlier this month, he predicted Bitcoin would sink to $75,000. The price touched $77,100 on Monday.
Hayes said Bitcoin may sink as low as $70,000 before recovering. Yet he suggested economic crises may spur central banks to action.
To be sure, Hayes has long argued excessively loose fiscal and monetary policies are ploughing the ground for a long term crypto bull market.
If traditional financial institutions start feeling stress, Hayes suggested the Fed, the People’s Bank of China, and central banks in the European Union and Japan may lower rates and print money.
“If you are more risk averse, wait for the central banks to ease then deploy more capital,” he wrote.
Andrew Flanagan is a markets correspondent for DL News. Have a tip? Reach out to aflanagan@dlnews.com.