Bitcoin Faces 33% Drop as Fed Rate Holds Spark Bear Market Fears

Analyst Timothy Peterson, author of "Metcalfe’s Law as a Model for Bitcoin Value," has warned that the cryptocurrency industry may be on the brink of another bear market. This analysis comes as the Federal Reserve maintains a cautious stance on interest rates despite persisting economic uncertainties.

Peterson's analysis, shared on X (Twitter), suggests that the market is currently overvalued, making it vulnerable to a downturn. While such a decline needs a trigger, he suggests that the Fed’s decision to keep interest rates steady could be enough to set it off. "It’s time to talk about the next bear market. There’s no reason to think it couldn’t happen now. The valuation justifies it. What it needs is a trigger. I think that trigger may be as simple as the Fed not cutting rates at all this year," Peterson wrote.

Peterson draws parallels between past market downturns and current conditions. Using the NASDAQ as a reference point, he estimates that a bear market could last anywhere from 7 to 14 months. Given that the NASDAQ is currently 28% overvalued, he anticipates a decline of about 17%, bringing the index down to 15,000. Applying these projections to Bitcoin, Peterson expects a roughly 33% drop, pushing Bitcoin’s price down to around $57,000. "Multiply by 1.9. 17% drop in NASDAQ = 33% drop in BTC -> $57k," Peterson added.

However, he notes that opportunistic investors could step in early. Such an intervention could prevent the Bitcoin price from falling that low, potentially finding support around $71,000. This aligns with a recent analysis from Arthur Hayes, who claimed Bitcoin could slump to $70,000 before a potential rebound. Analysts also highlighted Bitcoin’s air gap below $93,198, with little to no significant support until around the $70,000 range.

Meanwhile, about a month ago, Fed Chair Jerome Powell said that the central bank is in no rush to cut interest rates. He reiterated these remarks during his speech last week, emphasizing the need for patience. "We do not need to be in a hurry, and are well positioned to wait for greater clarity,"