Key Points
- Bitcoin’s price has dropped below $90,000 for the first time in over a month, amidst significant market volatility.
- BitMEX co-founder Arthur Hayes predicts Bitcoin could further fall to $70,000 due to large hedge funds unwinding their positions in US spot Bitcoin exchange-traded funds (ETFs).
The crypto market has been marked by significant volatility, with Bitcoin experiencing a 6.90% drop in the past 24 hours, taking its price below $89,266.65. This price drop is the first in over a month where Bitcoin has fallen below the $90,000 level. This shift is seen as a potential change in market sentiment, with BitMEX co-founder Arthur Hayes predicting an incoming “goblin town” for Bitcoin.
In a post on X (previously known as Twitter), Hayes warned that Bitcoin’s price could potentially drop to $70,000. This scenario could occur if large hedge funds decide to unwind their positions in US spot Bitcoin exchange-traded funds (ETFs). Hayes believes that outflows from leading ETFs, like the BlackRock iShares Bitcoin Trust (IBIT), could drive Bitcoin prices lower.
Hayes’ Perspective on Bitcoin Reserves
Hayes elaborated that many IBIT holders are hedge funds that have adopted a strategy of going long on ETFs while simultaneously shorting CME Bitcoin futures. This arbitrage trade allows them to earn a low-risk yield that surpasses short-term US Treasury returns. However, if the “basis spread” (the difference between futures and spot prices) narrows due to Bitcoin’s price decline, these funds may sell their IBIT shares and buy back CME futures to secure their profits.
Hayes has previously shared a bearish outlook on the United States buying Bitcoin (BTC) as part of its treasury. According to Hayes, Bitcoin’s volatility could be exploited by the Democrats to criticize the Trump administration. He sees this as a potential threat to Bitcoin’s price action, noting that authorities often sell and buy digital assets to achieve political goals. For the US government, “Bitcoin is just another financial asset,” Hayes stated.
Analyst’s Advice for Traders
As Bitcoin lost the $90,000 price level, renowned analyst Ali Martinez advised his followers on X to act like lions in the wild — patiently waiting for the right moment to strike. He urged traders to “trade with precision, not emotion,” emphasizing that the market is “volatile, unpredictable, and full of traps set by market makers to bait impatient traders into bad positions.”
Martinez pointed out that a significant reason for the decline in cryptocurrency prices is the reduction in liquidity. Since December 2024, capital inflows into crypto have dropped by over 70%. This decrease is a “massive warning sign” that crypto market participants have overlooked during the recent period.
Bitcoin’s recent drop is not solely due to hedge fund activity or drying up liquidity. The crypto market has also been affected by external factors, including the largest-ever hack at Bybit, a major cryptocurrency exchange, and a controversial meme coin scandal involving Argentina’s President Javier Milei.
Caroline Mauron, co-founder of Orbit Markets, told Bloomberg that these incidents have reignited negative sentiment among crypto market participants. The Bybit hack was especially damaging, contributing to a series of recent events that have led to investors losing trust in the crypto space.
