This year has been the perfect storm for crypto. On one end, the sector is moving through a cyclical
. On the other end, economic circumstances such as interest rate hikes have added a dose of uncertainty.
Richard Heart, the founder of Hex, an ethereum-based token that rewards investors for staking, told Insider in mid-May that he anticipated bitcoin could land anywhere between $ 10,600 and $ 10,350, while ethereum could hit $ 750. His views were a far cry from crypto enthusiasts who had been calling for bitcoin to reach six figures in the last quarter of 2021.
He based his price targets on previous cycles in which bitcoin tends to drop by about 85% and ether by 95% during a bear market. Since then, bitcoin has fallen below $ 19,000, with ether dropping to about $ 945.
Heart prides itself on being able to forecast events and price targets. He recalled past calls he made, including one on December 19, 2017, when he tweeted that cash was exiting bitcoin, marking the beginning of altcoin season. At the time, bitcoin had been trending downwards for four days, eventually turning into a bear market.
In September 2021, he tweeted an article about Celsius facing issues in Texas, New Jersey, and Alabama for providing unregistered products. He then followed up with a tweet that said if you deposited your money somewhere for interest rate yields, and the protocol failed, you’d lose everything. Heart referred to the strategy as picking up pennies in front of freight trains. In June, Celsius announced it was freezing withdrawals due to extreme market conditions. To date, depositors have not been able to reclaim their assets.
Heart knows he’s a controversial figure. He named the slew of Twitter users that he says have blocked him, including Microstrategy CEO Michael Saylor and Celsius CEO Alex Mashinsky. Yet, he’s sticking to his conviction that crypto doesn’t belong on exchanges where investors don’t hold their own keys.
Now, as the market tumbles, major crypto platforms and funds that make bets, provide loans, and offer yields are dropping like flies. The implosion of Terra Luna’s ecosystem was only the beginning of the spiral that would drag down major providers like Celsius, Voyager, and even veteran funds such as Three Arrows Capital.
4 reasons for new, lower forecasts
Heart believes the shakeout isn’t over yet. In fact, he’s circling back on his previous price forecasts with an even bolder prediction. Unique economic circumstances and a heavily levered environment could see bitcoin hit $ 5,000 and ether $ 550 or $ 500, he said.
His target prices are based on four conditions, the first of which is the US dollar’s returning strength. Heart noted that the dollar is getting more expensive, reaching 30-to-40-year highs relative to all other currencies. When this happens, anything priced in dollars, including bitcoin, inverts, he noted.
“When you have bitcoin versus the dollar but dollars aren’t worth shit, it’s very easy to go up,” Heart said. “But when you have bitcoin versus the dollar and the dollars are worth a lot now because everything else is going down versus the dollar and they finally stop printing them, for the first time in bitcoin’s existence, now you can go lower than an 85% . “
The second factor is interest rate hikes which have also dragged bitcoin’s price down, he said. Since the
announced the second rate hike of this cycle on May 4, bitcoin has dropped by about 50%. The crypto has been increasingly correlated with the stock market, which is inversely correlated with interest rates, he noted. As long as rate hikes continue and
is sucked out of the market, bitcoin’s price will keep dropping.
“Bitcoin has never existed in a time where there’s been a tightening fiscal policy. It’s never happened before,” Heart said.
Third, he points to pending doom waiting for the crypto market that could be coming from an inventory of bitcoin that could soon be up for liquidation. The US government might backup a truckload of its own seized stockpile, about 70,000 BTCs, to the market. The bitcoin, which was seized from an unnamed hacker, will be used to cancel the amount Ross Ulbricht, founder of Silk Road, was ordered to pay as part of his sentencing.
Then, there’s the Tokyo-based bitcoin exchange, Mt. Gox, which imploded in 2014 after it was revealed that there was missing or stolen bitcoin from its platform. Creditors received good news on July 6, noting that payouts are beginning. This will add another 142,000 BTCs that could be up for grabs if creditors decide to dump their bags. While Heart doesn’t believe it will be a full sellout, there’s a chance a big chunk may be up for sale.
Fourth, Heart noted that this bull run saw bitcoin make a double top, which is when an asset’s price peaks twice in a short period, Heart noted. Technical analysts use it as a signal for a bearish reversal pattern. A double top is something bitcoin hasn’t done before, he said, and he believes it was caused by an excess amount of leverage which inflated the price. This will delay bitcoin’s trek to the bottom, he added.
His advice to investors: You need to wait for the actual bottom. From a timing perspective, the previous bear market lasted a year to the day, he noted. But this round’s double top means there are a few more months to go before we see price support. However, he emphasized that this does not factor in interest rate hikes, which could further delay a bottom.
Yet, he still stands by his previous conviction that if investors buy bitcoin at $ 11,000, it’s a good deal, even if it plunges by another 50%.
As for ether, the same market-moving factors that would drag bitcoin further down would also have an impact on ether’s price, bringing it to a target price as low as $ 500, he added.
And as for other altcoins, Heart isn’t a fan. He doesn’t believe blockchain technology should be deployed in all industries.
“Blockchains are the world’s most expensive slowest databases,” Heart said. “They’re absolute garbage. They have no throughput. They have extremely high costs. They’re the most inefficient databases ever invented in history.”
He continued, “We’re willing to endure that horror and that pain for one reason, and one reason alone, censorship resistance. And so unless what you’re doing requires censorship resistance, you’d be better off doing it in any other way.” you could think of, an Excel spreadsheet, an Oracle database, a SQL database, you name it. ”