Bitcoin price plummets as mysterious hedge fund manager predicts sharp decline, citing four key headwinds threatening the crypto sector.
The crypto outlook remains bearish, with Lekker Capital’s Quinn Thompson predicting a severe downtrend in the sector reminiscent of 2022. According to Thompson, the current market conditions are ripe for a correction, and the crypto sector could be facing a prolonged period of decline.
The crypto market has experienced significant fluctuations in recent years, with prices soaring to new heights and plummeting unexpectedly.
According to a report by CoinMarketCap, the global cryptocurrency market capitalization reached an all-time high of $3 trillion in November 2021.
However, regulatory pressures and economic downturns have led to a decline in market value.
Experts predict that the adoption of blockchain technology and increasing institutional investment will drive growth in the crypto market.
Four Headwinds Threatening Risk-On Assets
Thompson identifies four key headwinds that will likely hurt the economy for the next six to nine months. Firstly, the Department of Government Efficiency (D.O.G.E.) is set to cut government spending, which has been a significant driver of job growth in recent years. This move is expected to have a painful and slow bleed effect on the labour market.
Secondly, the crackdown on illegal immigration at the southern border will likely affect the labour market, as migration puts pressure on wages. If this labour pool dries up, workers will demand higher salaries, which some businesses may not be able to afford.
Thirdly, the Trump administration’s constant tariff threats create uncertainty for businesses, which may delay investment or hiring decisions until the tariff situation is resolved.
Finally, the Federal Reserve does not seem to be in a hurry to loosen financial conditions, as inflation data has been poor. The Fed is expected to cut interest rates by anywhere between 25 and 75 basis points in 2025, but these cuts will be spread out throughout the year.
A Frustrating Slow Bleed Lower
Thompson believes that the White House‘s policies are likely to cause a frustrating slow bleed lower, rather than a quick plunge. He argues that the economy is already wobbly, and the new government’s fiscal arm is not interested in propping things up anymore.
The fact that the White House does not seem overly concerned about a potential recession is also a strong signal, according to Thompson. ‘Bessent is coming in saying, ‘We need to right the ship.’ And righting the ship means cutting off the juice that was powering these crazy asset prices,’ he said.
A recession is a period of economic decline, typically defined as a decline in Gross Domestic Product (GDP) for two or more consecutive quarters.
It can be caused by various factors, including inflation, interest rates, and government policies.
During a recession, businesses may reduce production, leading to increased unemployment and decreased consumer spending.
According to the National Bureau of Economic Research, the United States has experienced 11 recessions since World War II, with an average duration of 10-12 months.
A Long and Painful Slog Ahead
Thompson equates Trump’s policies to a controlled burn, where they are trying to purposefully clear the brush so that it doesn’t become a bigger problem. However, sometimes controlled burns can become forest fires. He believes that it will be a long kind of slog through the year as the White House tries to enact these policies.
A Potential Bottom in Sight
Thompson’s thesis suggests that the bottom for bitcoin could be near. The fact that the White House is unlikely to have a good year, and the economy is already facing significant headwinds, makes it likely that the crypto sector will not have a good year either.
‘I could see us going back to a five handle by the end of the year,’ Thompson said. A ‘five handle’ refers to a price between $50,000 and $59,999, which would be down substantially from the current level of $83,000 and roughly a 50% decline from bitcoin’s peak just above $109,000.
Bitcoin is a decentralized digital currency that allows for peer-to-peer transactions without the need for intermediaries.
Created in 2009 by an anonymous individual using the pseudonym Satoshi Nakamoto, bitcoin uses cryptography to secure and verify transactions.
The total supply of bitcoin is capped at 21 million, with new units created through a process called mining.
Bitcoin's value has fluctuated significantly over the years, influenced by factors such as market demand and regulatory developments.
Overall, Lekker Capital’s Quinn Thompson is bearish on the crypto sector, citing four key headwinds that will likely hurt the economy for the next six to nine months. He believes that the White House’s policies are likely to cause a frustrating slow bleed lower, and that the bottom for bitcoin could be near.
