Bitcoin and crypto’s massive $1 trillion meltdown over recent weeks has spooked investors, with sudden “price spiral” fears suddenly emerging.
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The bitcoin price has lost more than 50% since hitting its all-time high of almost $70,000 per bitcoin in November, dragged down by a hawkish Federal Reserve and the collapse of two major cryptocurrencies. The price of other major coins—including ethereum, BNB, XRP, solana, cardano and avalanche—have fared even worse.
Now, Scott Minerd, the chief investment officer at $252 billion asset manager Guggenheim, has revealed just how far he thinks bitcoin could fall before it hits an “ultimate bottom”—while warning “the majority of crypto is garbage.”
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“When you break below $30,000 consistently, $8,000 is the ultimate bottom,” Minerd told CNBC on the sidelines of the World Economic Forum in Davos, adding bitcoin is the “canary in the coal mine” when it comes to the wider crypto market.
“We’re seeing crypto collapse as it is,” Minerd said. “Let’s face it—most of these currencies, they’re not currencies, they’re junk. The majority of crypto is garbage.”
Smaller cryptocurrencies, such as ethereum, BNB, XRP, solana, cardano and avalanche, were hard hit by the sudden collapse of the terraUSD stablecoin and its support coin luna this month, with panic sweeping through the market as contagion appeared to spread.
Minerd, who predicts both bitcoin and ethereum—the two largest cryptocurrencies by a considerable margin—will both survive the current crypto crash, thinks future a cryptocurrency will outclass many of the smaller coins currently jostling for space.
“I don’t think we’ve seen the dominant player in crypto yet, I don’t think we’ve had the right prototype yet for crypto.”
The bitcoin price began falling along with stock markets late last year after rocketing through the pandemic era, surging as the US Federal Reserve pumped cash into the economy to combat the economic damage of Covid-19 and lockdowns.
This week, the latest Fed Open Market Committee meeting minutes revealed the central bank will continue to pursue its policy of interest rate hikes and cuts to its bloated balance sheet, with most committee members signaling 50-basis-point hikes would “likely be appropriate” at the upcoming June and July meetings.
“I think we have a lot more room to the downside, especially with the Fed being restrictive,” Minerd said. Others have also pointed to the European Central Bank’s (ECB) telegraphed interest rate hike in July—its first in a decade—as weighing on markets.
“Risk assets have found no relief in the past week as [Fed chair] Jerome Powell remains steadfast with the FEDs approach to curb inflation via rate hikes and balance sheet reduction, while [ECB president] Christine Lagarde has reported the ECB will increase rates for the first time in over a decade starting in July and September of 2022,” Will Hamilton, head of trading and research at asset manager Trovio, wrote in emailed comments.
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The bleak bitcoin and crypto market outlook reflects the gloomy mood that has taken hold in recent months following the heady 2021 bull market that caused some to make outrageously bullish bitcoin price predictions.
Last year, Miner predicted the bitcoin price could climb as high as $600,000 per bitcoin—a price that would make bitcoin’s total value around $12 trillion.
“Cryptocurrency has come into the realm of respectability and will continue to become more and more important in the global economy,” Minerd said in February last year.