Cryptocurrency prices have been on a downward trend since March 28, 2022, and it doesn’t look like things will improve in the short term. That’s according to former BitMEX CEO Arthur Hayes, who recently put forward a bearish view, to put it mildly, on the cryptocurrency market.
In a gloomy Medium post, Hayes predicts a scenario he calls the ‘coming crypto carnage’ in which he sees Bitcoin (BTC) and most cryptocurrencies significantly decline in value in the second quarter before they make a recovery.
The premise of Hayes’ bearish thesis is based on the impact of a tandem move between the correlation of crypto and the Nasdaq 100 Index (NDX), and macro trigger events such as Russia’s invasion of Ukraine negatively impacting the cryptocurrency market.
“Global growth will decline on higher commodity prices driven by the continuation and possible escalation of the Russia / Ukraine war,” Hayes’ writes, adding that this will hurt the price of stocks.
While the crypto luminary remains bullish on cryptoasset prices over the long term, projecting Bitcoin eventually hitting $1 million in a 3-5 year horizon, he puts forward the view that both crypto and NDX, an index of large-cap technology stocks, are standing on the precipice with the latter likely to drag Bitcoin and Ether (ETH) to around the $30,000 and $2,500 level respectively by June.
To back up his argument, Hayes puts forward a number of charts showing as he says ‘justified, or not’ the correlation between cryptocurrencies and traditional markets. According to Hayes this demonstrates the “inconvenient truth that haunts crypto at this current juncture.”
Another key point in Hayes’ argument is the current environment of high interest rates and their tendency to bring down tech stock valuations as the basis for a possible NDX tanking scenario.
“If you believe in unicorns, the Loch Ness Monster, and the Easter Bunny, then it is possible that you believe big tech will not suffer due to rising nominal interest rates,” Hayes writes.
To further prove his point, the former investment banker notes that based on his chart analysis, the Index’s failure to break through a key retracement Fib level on the bounce, suggests more downside is coming.
“The chart tells me the NDX will continue lower, test its local low, and break decidedly below it. I believe the next stop after that is to test 10,000..”
The Nasdaq 100 was last trading at 14,054.49. Hayes’ projection represents a 28.5% nosedive for the index from current levels.
Along the same bearish lines, Hayes says he’s been accumulating a number of altcoins because the prices he says are quite attractive. However, Hayes remains concerned that they will drop lower during this year.
“Even though some of these coins are already down 75% from their all-time high, I don’t believe even they can escape the coming crypto carnage,” he says. As a result, Hayes is hedging his bets by buying crash June 2022 puts on both BTC and Ether (ETH).
Concluding his analysis, the co-founder of BitMEX accepts that this market prognosis might not prove him right.
“I will be wrong if the correlation between Bitcoin / Ether and [Nasdaq 100] starts dropping before a crash in risk asset markets,” he says, adding that he’s “perfectly okay with that outcome,” given he has a long position on cryptoassets over the longer term.
BTC traded 7.60% lower at $39,790 at press time. ETH is also in the red by more than 9%, printing below $3,000.
h/t: The Block