Bitcoin is down 25% from its 2020 high of around $10,500 amid a widespread market pullback triggered by the coronavirus. Jehan Chu, an executive at the blockchain hedge fund and venture capital firm Kenetic Capital, believes the pain is not over yet.
In a new interview with Bloomberg, Chu paints a short-term bearish picture for BTC and other cryptocurrencies.
“Macro dominoes are falling to create a chain of negative sentiment, which is, in turn, triggering a sell-off of crypto.”
Chu says Monday’s drop, which saw Bitcoin dip as low as $7,695, is nothing new since “Bitcoin has always been subject to short-term, sometimes-violent volatility.” He predicts it could drop even further.
On the flip side, Chu says the virus and global economic weakness offer a solid case for investors to flock into cryptocurrencies. He’s also optimistic about the coming halving, which will reduce the amount of new Bitcoin entering the market in May. Under these circumstances, Chu thinks Bitcoin may bounce prior to the event.
“A similarly rapid turnaround and appreciation is equally anticipated on the way to higher levels leading into the halvening.”
Raoul Pal, CEO of market analysis firm Global Macro Investor, echoes Chu’s sentiments. The investment strategist also believes Bitcoin has more room to fall.
“It feels like any hedge fund that was long Bitcoin is having to liquidate. VAR [value at risk] takes no prisoners. (For those new to VAR it is the measure of risk in a portfolio and is connected to volatility, so as volume goes up of all assets, they have to reduce risk).”
Although he says hedge funds have to reduce exposure to risk due to Bitcoin’s rising volatility, Pal expects Bitcoin to eventually reverse its bearish trend as investors seek a new financial system. But the timing, he says, is far from certain.
“It’s a buying opportunity but no need to rush in yet. The current event in markets will accelerate the need for the new financial system over time. We know where this is leading to – the digital revolution. Hodl on to your hats…! Good luck.”
