- The crypto market experiences a sudden $100 billion downturn, with Bitcoin and other major cryptocurrencies plunging nearly 10% in the wake of a Federal Reserve warning.
- Crypto trader Arthur Hayes had previously predicted a potential 30% Bitcoin crash, citing concerns of a “vicious washout,” while market dynamics, including the approval of spot Bitcoin ETFs, contribute to the market turbulence.
Bitcoin and various cryptocurrencies, including Ethereum, XRP, and Solana, have experienced a substantial downturn, shedding nearly 10% of their value in the past 24 hours. This sudden price plunge, wiping out approximately $100 billion from the overall crypto market, follows a significant surge in the Bitcoin spot exchange-traded fund (ETF).
The market turmoil has been exacerbated by a serious warning from the Federal Reserve, echoing concerns from notable figures like crypto trader Arthur Hayes.
Hayes, the Chief Investment Officer of family office Maelstrom and former CEO of BitMex, had previously cautioned about a potential 30% Bitcoin price crash soon, predicting a “vicious washout” in the coming months. He emphasized his concerns in a blog post, stating, “I am preparing for a vicious washout of all the crypto tourists in March of this year,” expressing his belief that the period until April would be a ‘no-trade zone’ in terms of adding risk.
The anticipated crash, according to Hayes, could range between 20% to 30%, driven by what he termed a “dollar liquidity rug pull.” Despite this pessimistic outlook, Hayes remained optimistic about Bitcoin’s resilience, anticipating a swift rebound. He attributed this to Bitcoin’s status as the only neutral reserve hard currency not tied to the liabilities of the banking system and its global trade accessibility.
Hayes also touched on the role of the Federal Reserve, stating that the Bitcoin price would initially decline in tandem with broader financial markets, but he expected a rapid recovery, especially before the Federal Reserve meeting. The Federal Reserve’s decision to restart its money printer was seen as a factor that could contribute to the recovery of the Bitcoin price.
This latest downturn echoes the 2022 crypto market crash, where $2 trillion was wiped out due to the Federal Reserve’s measures in response to soaring inflation. The recent approval of spot Bitcoin ETFs, while initially perceived as a positive development, has triggered a ‘sell the news’ reaction in the market.
CK Zheng, Chief Investment Officer at crypto hedge fund ZX Squared Capital, noted, “The approval of spot bitcoin ETFs is still a ‘sell the news’ event, but we believe it will be very shallow in the near term.” He expressed confidence in potential market opportunities, stating,
“If there is any material pullback in the bitcoin price during the short term, we believe it will be a great opportunity to add significantly more long positions.”
As the crypto markets navigate this sudden turbulence, investors are bracing for a rollercoaster ride, closely monitoring Federal Reserve decisions and market dynamics for potential opportunities.
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