Timothy Peterson, the renowned author of ‘Metcalfe’s Law as a Model for Bitcoin Value’, has raised concerns about the cryptocurrency industry potentially heading towards a bear market. This forecast comes in light of the Federal Reserve’s (Fed) continued cautious approach towards interest rates amidst lingering economic uncertainties.
Peterson has made an attempt to explain how a bear market might unfold. He wrote, “It’s time to discuss the next bear market. The current valuation justifies it and all it needs is a trigger. I believe that trigger could be as simple as the Fed not reducing interest rates this year.”
Through his analysis, Peterson draws comparisons between past market downturns and the current scenario. By using the NASDAQ as a benchmark, he speculates that a bear market could last anywhere from 7 to 14 months.
Given that the NASDAQ is presently 28% overvalued, Peterson predicts a decline of approximately 17%, bringing the index down to 15,000. Extending these forecasts to Bitcoin, he anticipates a roughly 33% fall, which would push the Bitcoin price down to around $57,000. However, he does note that early intervention by opportunistic investors could stop Bitcoin from falling that far, potentially finding support around $71,000.
This projection aligns with a recent analysis from Arthur Hayes, the BitMex founder, who suggested that Bitcoin could fall to $70,000 before potentially rebounding. Analysts also pointed out Bitcoin’s air gap below $93,198, with little to no significant support until around the $70,000 range.
About a month ago, Fed Chair Jerome Powell asserted that the central bank is in no hurry to cut interest rates. He reiterated these remarks during a speech at a policy forum in New York, emphasizing the need for patience.
Powell’s comments come amidst economic uncertainty driven by President Donald Trump’s policy changes in trade, immigration, fiscal policy, and regulation. With inflation around 2.5%, the Fed’s focus is on addressing these challenges cautiously. Despite market expectations for rate cuts this year, Powell has made it clear that the Fed will adopt a wait-and-see approach before adjusting monetary policy.
Adding to the apprehensions about a possible Fed-induced downturn, Bitcoin recently fell following the Fed’s warning of a potential recession. This has negatively impacted investor sentiment. Despite these warnings, Peterson is not convinced that a fully-fledged bear market is imminent, arguing that the current market conditions are not as euphoric as those of previous bubbles and that the bearish sentiment among investors could indicate a long-term buying opportunity rather than a sell signal.
According to BeInCrypto data, Bitcoin was trading at $86,026 at the time of writing, down 0.1% since the opening of Sunday’s session.
