Cryptocurrency analyst predicts: Bitcoin could see bigger drops in coming weeks

Cryptocurrency analyst Benjamin Cowen explained in a recent statement that the price of Bitcoin could fall further next month.

Bitcoin has been experiencing a bearish trend recently. In November last year, Bitcoin was trading as high as $68,000. Everyone thought it was on top of the world, and for a while it was, but once you climb to the top of Mount Everest, there is no choice but to go down.

Bitcoin is now experiencing a decline, with it trading nearly $30,000 lower than it was three months ago. According to Cowen, things could get worse in the coming weeks.

Cowen said, "The worst case scenario is obviously bearish, which means we could be at lower prices. Earlier this quarter, we fell to $33,000. My overall view on the first quarter is bearish for Bitcoin, at best neutral. The best case scenario I can imagine is that Bitcoin closes the first quarter around $46,000."

This goes against the grain of many other analysts. For some, like those at Fundstrat, 2022 will be the most bullish year yet for Bitcoin, with some claiming that it will reach six-figure prices between $100,000 and $200,000. However, Cowen is adamant that this will not be the case for Bitcoin. He mentioned, “I see quantitative tightening (and) a lot of economic uncertainty.”

In its analysis of the cryptocurrency situation, Cowen noted that in the summer of 2021, when Bitcoin fell below $30,000, many altcoins also experienced significant declines, affecting their overall valuations.

In addition, he believes that the Federal Reserve may raise interest rates again in March, which may ultimately affect the price trend of Bitcoin. He said, "At the end of the fourth quarter of last year, Bitcoin became increasingly correlated with stocks and fell in the face of the prospect of central bank tightening policy."

FTX founder and CEO Sam Bankman-Fried said that the recent price volatility of Bitcoin is caused by a tug-of-war between two different types of investors.

He said, “Let’s say there are two kinds of people in the world: fundamental investors and algorithm followers. Fundamental investors look at the situation and are unsure of which direction BTC/USD should go. Algorithmic followers look at the data.”

Bankman-Fried said the two types of investors have different trading strategies when exploring correlations between crypto assets and stocks.

He said, “Over the past year, the correlation between crypto and stocks has been very high. The main reason is monetary policy: changes in inflation and interest rate expectations move the dollar and other fiat currencies. Higher inflation [means] crypto and stocks rise against the dollar. So algorithm followers look at the data and decide based on that, Bitcoin should have an 80% correlation with the S&P 500 and a beta of 4 (i.e. if the S&P 500 goes up 1%, BTC goes up 4%). Fundamental investors are neutral, but algorithm followers see the S&P 500 falling 4%, so based on historical research expect BTC to fall 16%.”

The CEO said the tug-of-war between these types of traders means Bitcoin’s price will end up somewhere in between.

Peter Brandt, an experienced futures and foreign exchange trader, tweeted, "It's not the news and events that reflect market fundamentals that matter. It's how the market reacts to the news and events that matter. If the news is positive for the market, but the market doesn't react accordingly, then we know there's something very wrong with the market."

Using a graphic forecast based on Brandt's research, Bitcoin, the world's largest cryptocurrency by market value, could fall to $28,805 within a few days.

As previously reported by Bitpush, Luna Foundation Guard (LFG) raised $1 billion through over-the-counter sales of LUNA (the native token of the Terra blockchain). This financing is one of the largest financings in the history of the crypto industry, and the proceeds from the $1 billion sale will be used to establish Bitcoin-denominated foreign exchange reserves for Terra's largest stablecoin UST.

While many expect the news could cause Bitcoin’s value to surge, traders appear more concerned about other issues, including the impact of escalating tensions between Russia and Ukraine, future interest rate hikes by the Federal Reserve and the cryptocurrency enforcement bill on Bitcoin’s price.