What if Bitcoin falls below $20K, predicts Arthur Hayes?

The crypto market pushes further lower and appears poised for more losses as Bitcoin bottoms out from its current levels. The number one crypto by market cap is approaching a major support level, and if the bulls fail to protect it, the price of BTC could return to its 2020 range.

Related Reading | In numbers: Bitcoin suffers the biggest single-day drop since March 2020

At the time of writing, Bitcoin (BTC) is trading at $21,800 with a 5% and 29% loss in the last 24 hours and 7 days, respectively. The price of BTC started to trend down as a result of a series of bad news about major cryptocurrency companies, and the change in monetary policy by the US Federal Reserve (FED).

BTC price is trending down on the 4-hour chart. Source: BTCUSD Tradingview

The general sentiment in crypto is fear as market participants are poised for further losses. According to For BitMEX co-founder Arthur Hayes, investors are hedging against downward price action by buying put option contracts.

Hayes claims that Deribit options platforms record high open interest (OI), total open options contracts, for Bitcoin at $20,000 and for Ethereum at $1,000. Additionally, Hayes believes that other “massive” investment vehicles could “focus on those strikes,” around those specific price levels.

In that sense, $20,000 looks like a critical support level for Bitcoin. This price point coincides with the bullish peak of 2017 when the price of BTC rose from below $3,000 and entered price discovery mode.

Previous all-time highs are often key levels when an asset is trending down. Many people might have bought the 2020 rally above $20,000, and may not be willing to sell below this price. Hayes said the following:

As far as the charts go, you better get out your Lord Satoshi prayer book and hope the lord shows kindness in the soul of the crypto markets. Because if these levels break, you better turn off your computer because your graphics will be useless for a while.

Could Bitcoin enter a black hole?

If Bitcoin and Ethereum cannot hold above those levels, Hayes predicts potential doom for the crypto market. As the Fed begins to hike interest rates, the market appears poised for further losses, even if BTC and ETH are at critical support. Hayes added:

If these levels break, 20k BTC and 1k ETH, we can expect massive selling pressure in the spot markets as dealers hedge. We can also expect that there will be some over the counter dealers and they may not be able to cover themselves properly and could go bust.

Related Reading | Has Bitcoin already bottomed out? This is what the on-chain data says

For the time being, the crypto market and traditional markets could experience some relief as indicators enter oversold levels.

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