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Acting editor-in-chief
Gary McFarlane
Acting editor-in-chief
Gary McFarlane
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Why Trust Cryptonews
The bitcoin price crash could see the bellwether coin’s value fall below $70,000 if a full-blown trade war breaks out and the macroeconomic storm clouds continue to darken, but there’s light at the end of the tunnel.
The risk-on trades that exploded in the wake of Trump’s election seem like an age ago and the warnings of bears at the time are prescient.
In December last year, Galaxy Digital CEO Mike Novogratz predicted the crypto market would see “one, if not two, vicious retracements, which will test your soul.”
We are now in the midst of that correction, and we are overshooting Novogratz’s penciled $85k number.
Things could get a whole lot worse than $85k, as we saw earlier today when bitcoin fell to as low as $78k.
Here’s the nightmare scenario: long-time crypto skeptic Peter Schiff thinks bitcoin could revisit the $50,000 level:
If $50k comes to pass it will prove Novogrtaz wrong in one of his other predictions, when he said bitcoin would never go below $55,000 again.
The real panic may be ahead of us…
Looking to the near future, Mark Cudmore, from Bloomberg’s Markets Live team, puts it like this:
“The real panic may be ahead of us still. Bitcoin always has another 70%+ crash in its future, by construction. $72k-$74k would appear to be the technical crunch zone that might trigger the next crypto winter.“
But to fully understand crypto’s current predicament, we have to admit that Trump 2.0 may well be the worst thing that ever happened to crypto.
Trump 2.0 wasn’t meant to be like this – the downside of moving fast and breaking things
Most economists agree that tariffs are a terrible idea, but Trump’s Truth Social pronouncements this week show that he intends to stay the course.
Forlorn hopes that the 10% tariff on China would be the end of the matter appear to be wishful thinking. Likewise, the hope that the 25% tariffs on all Canadian and Mexican imports into the US would be postponed indefinitely may turn out to be a false hope too.
Together, China, Mexico, and Canada account for 40% of US trade, and the Trump administration seems intent on destroying the underpinning carefully honed supply chains it has taken decades to assemble.
A similar story of ‘uncreative destruction’ is emerging courtesy of Elon Musk’s DOGE. It looks like a bunch of kids think that the Federal government is the same thing as a tech startup or even a Big Tech a la Facebook/Meta, where you can “move fast and break things”, as newly minted MAGA Tech Bro Mark Zuckerburg.
Once legacy systems are broken, and the people who knew about them are fired, it might be difficult to repair the damage, let alone improve on the systems, as was apparently the original intention.
So now we have measles outbreaks in Texas; this week alone two aircraft had to abort their landings because of the risk of an in-flight collision; farmers who voted for Trump are losing their farms; Federal workers who voted Trump are losing their jobs; bird flu is running rampant but the vaccine research funding to stop it in its tracks is being cut off, and so it goes on.
Back with the macro bigger picture – the much-vaunted GOP tax cuts could increase the US deficit by $4 trillion, which is surely the kind of “fiscal folly” that Warren Buffett had in mind in his most recent letter to Berkshire Hathaway shareholders, warning that “paper money can see its value evaporate”:
“In some countries, this reckless practice has become habitual, and, in our country’s short history, the U.S. has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency,” Buffett said.
Warren Buffett in letter to shareholders of Berkshire Hathaway
Fiat’s inherent flaws will be crypto’s opportunity, but it doesn’t dispel the fear among the crypto donors to the Trump project that now that the votes are in, it’s time to gut Medicaid and deny benefits to Vets.
Trump and Musk may soon find out that MAGA scorned can be a dangerous thing – for more on that, visit the LeopardsAteMyFace reddit for your daily diet of complaints from the disappointed and enraged.
And we haven’t even mentioned the price of eggs, or today’s data drop of the Fed’s preferred measure of inflation, the Personal Consumption Expenditures (PCE). Stagflation is entering the lexicon of economic commentators for good reason.
Trump 2.0 delivers institutional entanglement and that could make this bitcoin price crash the worst ever
Of course, where crypto is concerned, the personnel has changed at various government agencies, and SEC lawsuits have been dropped, but nothing else of consequence has actually happened except the setting up of a task force to discuss establishing a crypto framework.
Actually, it is not quite true that nothing much has happened in Trump 2.0 so far.
Sure, the strategic reserve hasn’t happened but some other stuff has – like the biggest-ever hack in crypto history over at Bybit (thank you North Korea – maybe that’s why the US voted with North Korea on the Ukraine war at the United Nations?) and the $LIBRA scam, not to mention Trump’s naked grifting in the meme coin space, which left a sour taste in the mouth and arguably was the portend of the doom-times to come.
However, the really big thing that has happened is in the financial plumbing – institutions have cozied up to crypto in ways that mean the fates of the equity markets and the crypto are more entwined than ever before.
That was fine when the ‘Magnificent Seven’ were the Prometheus Unbound of the stock market, but not so much when Nvidia’s stock price plummets 8% in one session, as it did on Thursday.
Hedge funds have been playing in cryptoland for a while, but they have become more enmeshed of late. One of their favorite trades – the carry trade to farm yield – is unraveling before our eyes, adding fuel to the fire.
MicroStrategy has a strategy that highlights everything that’s bad about leverage in crypto
For a front-row seat on how the marriage of TradFi and crypto will play out over the next few days, weeks and months, cast your eyes upon MicroStrategy (now renamed Strategy).
Down more than 50% from its highs, Strategy is a leveraged bet on bitcoin. The problem with leverage, though, is that it can be wickedly damaging when the market moves against you, and that can happen very quickly.
By way of an example of the downside of excessive leverage, check out the performance of MicroStrategy 2x leveraged ETFs:
In one stark example, two levered ETFs tied to Michael Saylor’s Bitcoin-hoarding company Strategy, which were together worth more than $5 billion at one point, are down about 40% in three days.
That was written three days ago. The situation has deteriorated markedly since then. Yesterday, the T-Rex 2X Long MSTR Daily Target ETF (MSTU) fell 17.66%. Its three-month return is -72%. Ouch. From its all-time high, it is down 85%.
Since 20 February $3.133 billion has exited bitcoin ETFs and that is likely to accelerate today.
With Michael Saylor controlling 46% of the voting shares at Strategy, there is some protection against forced liquidation for shareholders and bondholders, but not if bitcoin keeps falling.
Still, the good news in all this mayhem is that the bitcoin price always eventually bounces back to make higher highs.
It means if you went into cash (or USDT, assuming it holds its dollar peg) at the right time, then you may soon(ish) be able to buy back in and make a killing. Or if you plan to hold on for dear life, sit back and chill… Crypto might be in trouble right now, but fiat is in an even bigger bind.
All the money that has been sitting on the sidelines with retail and institutions will, with patience, have the opportunity they’ve been waiting for. In case you missed the news, Giant market maker Citadel Securities announced at the beginning of this week that it was planning to start making crypto markets.
And for those who see bullish bitcoin times ahead but don’t own any bitcoin as yet, there’s the BTC Bull Token to reward you with airdrops, but do your own research.
