Bitcoin’s market may be on the verge of a significant downturn, according to analyst Timothy Peterson, author of Metcalfe’s Law as a Model for Bitcoin Value. Peterson warns that Bitcoin is overvalued, and with the Federal Reserve maintaining a cautious stance on interest rate cuts, the cryptocurrency market could face a new bear market.
Analyst Predicts 33% Drop for Bitcoin
In a recent post shared on Twitter, Peterson highlighted concerns over Bitcoin’s current valuation, drawing parallels to past market cycles that eventually led to prolonged bear markets. He predicts that Bitcoin could experience a 33% drop, which would see its price fall to around $57,000. Peterson’s analysis aligns Bitcoin’s trajectory with the performance of the NASDAQ, which is currently 28% overvalued. He suggests that a downturn of this magnitude could result in Bitcoin falling as low as $57,000.
However, Peterson also notes that Bitcoin could find some support around $71,000, with opportunistic investors potentially stepping in to prevent further declines. This level of support aligns with recent predictions by other analysts, including Arthur Hayes, who forecasts a potential dip to $70,000 before a possible rebound.
Fed’s Stance Adds to Market Uncertainty
The Federal Reserve’s decision to hold interest rates steady has fueled uncertainty in both traditional financial markets and cryptocurrencies. Fed Chair Jerome Powell recently emphasized that the central bank would not rush to cut interest rates, urging patience as economic conditions unfold. Powell’s cautious tone has left markets unsettled, with many investors adjusting their expectations for interest rate cuts this year.
As the Fed projects a potential economic slowdown, including a 2.8% decline in GDP for the first quarter of 2025, concerns of a recession are growing. This has added pressure to both equity markets and cryptocurrencies, contributing to the growing sentiment of caution among investors.
Is a Full Bear Market Imminent?
Despite the bearish predictions, Peterson suggests that the current market environment is not as euphoric as previous bubble phases. He argues that the subdued investor sentiment could potentially offer a long-term buying opportunity rather than a cause for panic selling.
At the time of writing, Bitcoin was trading at approximately $86,026, down marginally since the start of the week. With technical indicators suggesting further downside risks, Bitcoin’s next move could heavily depend on the broader economic outlook and the Fed’s future policy decisions. Investors will be closely monitoring Powell’s next steps, as any changes in monetary policy could have significant implications for the crypto market.
Also read:Jerome Powell’s Remarks Send Crypto Market Tumbling: Here’s How It Reacted
