- Investor Louis Navlier says Bitcoin is in a bubble, and the Fed’s “tapping” could cause it to explode.
- Navellier says that as prices rise and investors avoid risk, bitcoin could drop to $10,000.
- Bitcoin soared from under $4,000 in March 2020 to $67,000 in early November.
Bitcoin became mainstream thanks to its high price – but long before that it was wildly popular
The $1 trillion cryptocurrency plunged as much as 22% on December 4 to $41,967.5, and is down 38% since hitting an all-time high three weeks ago. This is a difficult stretch, but in terms of its history it is not very noticeable.
Bitcoin first traded at $10,000 in February 2017, and after several reversals, it crossed the $10,000 mark again shortly before the market crash caused by the pandemic. This collapse caused the coin to drop below $4,000. It has jumped more than 1,000% since then – although traders endured another drop of 50% between May and July 2021.
Investment veteran and author Louis Navilier says there are signs that the worst is in store. He says it has become clear that there is an obsession around bitcoin, pointing to the $100 million Crypto.com ad campaign that includes a TV commercial starring Matt Damon as evidence.
Navellier has been picking stocks and writing about the market for more than three decades. According to the data of Navellier & Associates, an investment of $100,000 according to a regularly updated growth investor buy list in December 1997 would have turned into $1.77 million as of this year.
Longtime growth investor says a bubble is forming even though
Now reduce the bond purchases you use to keep interest rates low. In fact, it may try to combat inflation by reducing those purchases faster than expected.
“The Fed is tapering, and that would create a correction in the risk assets, of which bitcoin is a part. And the more the Fed tapered off, the more volatility we should see in both stocks and bonds — and yes, bitcoin too,” he said in Recent note.
The last major phase of de-risking in the markets occurred at the beginning of the COVID-19 pandemic, and Bitcoin was hit hard in the beginning. Its price has decreased by 50% between February and March 2020.
Navellier says that if the recent sell-off continues, it will trigger a deep bearish reversal that would wipe out 80% of bitcoin’s value.
“I would consider a dip below $46,000 (the 200-day moving average) to be a yellow flag and a dip below the spring low of $28,500 to be a completed massive double top indicating a drop below $10,000, which by the way would match many of 80%+ declines in its written history.”
In a double top, the asset reaches a new high, goes through a short pullback, and then returns to the previous high, a sequence that can convince investors that the asset has overcome a short low. But from there the price will drop again to the low it made during that short dip, and then break through that level and drop much further without a clear base of support.
It’s a frightening pattern that only becomes apparent too late.
While Navellier is making a dramatic prediction, Bitcoin has endured a few plunges of 80% before, the last of which began in December 2017 and spanned most of 2018. There were many reasons, including the government’s refusal to allow Bitcoin ETF trading, concerns about hacks, and warnings from prominent investors such as Warren Buffett.
Navellier isn’t the only skeptic of bitcoin — JPMorgan Chase chief Jimmy Dimon has sabotaged it multiple times — but the financial community seems much more enthusiastic about cryptocurrencies today. It has been embraced by former skeptics such as billionaire investor Stanley Druckenmiller, and Paul Tudor Jones says he prefers the native cryptocurrency to gold as an inflation hedge.
But as the price of Bitcoin rose, so did the expectations of enthusiasts. Mike Novogratz, the former hedge fund manager who now runs crypto investment firm Galaxy Digital, said in February that bitcoin will reach $100,000 by the end of 2021 — and he remains bullish though he admits that his predictions may not come true.