16.05.202210:15 Forex Analysis & Reviews: Bitcoin to drop to $20k and ETH to $1300, says Arthur Hayes: how likely is this?

Last week was one of the most volatile in the last six months in the cryptocurrency market. Coins reached and broke local lows, and investors hysterically sold their capital, fueled by the collapse of the algorithmic stablecoin UST. And then the long-awaited weekend came, trading activity decreased and cryptocurrencies began local upward corrections. Thanks to this, the total capitalization of digital assets grew by 1.75% over the past day and reached $1.3 trillion.

Despite the local positive, it is still too early to talk about a market reversal. Bitmex co-founder and former CEO Arthur Hayes is sure of this. In his opinion, Bitcoin will continue its downward movement to $20k, and Ethereum will complete the fall around the $1300 level. Among the main arguments, the entrepreneur points out these zones as historical highs of the previous bull market in 2017/2018. Hayes also believes that the main catalyst for the further fall in prices will be the Fed's policy, the increase in the key rate and the start of the quantitative tightening program.

Hayes' position looks promising from both a fundamental and a technical point of view. First, there is no reason to believe that the Fed is going to loosen its grip and ease monetary policy. On the contrary, most likely, the Fed will again raise the key rate by 0.5%. This is hinted at by data on the growth of consumer prices, which turned out to be at a level higher than expected. June also sees the start of a program to withdraw liquidity from the markets, which will hit stock indices and other high-risk assets. Reaching the absolute bottom of market sentiment, as well as a sharp rebound from $24k, should not be misleading—there are still plenty of prerequisites for the price to decline.

In technical terms, a further decline in the price of Bitcoin is indicated by the partial realization of the "bear flag" formation, the final potential of which is in the region of $20k. At the same time, it is important to note that technical indicators do not demonstrate a single dynamics of price movement. RSI and stochastics fell to the lower border of the bullish zone, and MACD is getting more and more clear upward signals. This may indicate the emergence of a medium-term bullish movement.

An extremely interesting figure formed on the 4-Hour timeframe. After a long downward trend, the chart has formed an inverted head and shoulders pattern with targets at $35k–$36k. However, for its full formation, the price needs to reach $32k and break through the shoulder level. At the same time, technical indicators on the 4H chart look pessimistic. The stochastic oscillator and RSI point to rising selling volumes, while the MACD broke the upward move to zero, facing strong selling positions.

Ethereum is on a solid support zone that has not broken through since early 2021. ETH/USD price movement will be completely dependent on Bitcoin, but now, during the consolidation period, the price is trying to gain a foothold above the $2000 level. Technical indicators continue to fluctuate near the bullish zone, while the MACD is moving flat, which reflects the current market sentiment. In moments of crisis, the price of the main altcoin becomes completely dependent on BTC. Therefore, if Bitcoin moves to the $20k area, there is every reason to believe that the ether will make a similar maneuver. This is also indicated by the fact that in percentage terms, the fall of Bitcoin to $20k corresponds to the level of $1300 for Ethereum.

The market is tired of endless growth and takes a local pause with an upward correction. However, investors have not yet adjusted to the new realities, and therefore, with new actions and statements by the Fed, the cryptocurrency market will plunge into the abyss of a bear market.