According to former BitMex CEO Arthur Hayes, a more intense sale of cryptocurrencies is likely to occur in the near future. Referencing a famous quote from Warren Buffet, Hayes suggested that the market is trying to figure out who is swimming naked. Buffett's explanation of this quote is that the exit of a tide usually exposes the risks and weaknesses of some companies.
This wisdom from Buffett is particularly applicable to the current situation in the cryptocurrency market. Major players like Celsius and Three Arrows Capital (3AC) are showing huge signs of weakness. If this trend continues, it is likely that many other top players in the industry will follow in the footsteps of Celsius and 3AC.
Hayes' interesting analysis
Hayes noted that the Canadian Bitcoin ETF's total BTC holdings have fallen by nearly 50% since last Friday. The fund had around 43.701 BTC as of June 1, 2022. Hayes added that this is a lot of physical BTC to sell in a short time. Over the weekend, the price of Bitcoin plummeted to $ 17.600, a 20% drop in a couple of hours.
The price of $ 17.600 represents the lowest since December 2020. However, Hayes said the drop indicates that a forced seller has triggered several stop-loss orders. According to our data, the main digital asset is currently trading at $ 20.512.
However, Bitcoin bulls shouldn't expect Bitcoin to be on the upswing already. Hayes added that there may still be forced sales. According to him, some cryptocurrency lenders have poor risk management and too long loan terms.
As reported here on CNF, the former BitMex CEO predicted that the price of many altcoins would drop by at least 50% in the coming weeks. Popular altcoins, such as Solana and Polkadot, are at around 90% of their peak price after a painful bear market.
The correlation between US stocks and cryptocurrencies has broken
Famous Asia-based cryptocurrency journalist Collins Wu (@wublockchain on Twitter) said there is no longer a correlation between US stocks and cryptocurrencies. According to him, the Nasdaq 100 has dropped nearly 11,4% since the beginning of the month.
By comparison, Bitcoin and Ethereum dropped 35,8% and 44,5% respectively over the same period. US equities and cryptocurrencies had a similar trend until June 11. However, after June 11, the cryptocurrency market experienced a sharp decline.
Wu argues that the intense selloff by the Investors cryptocurrency institutions is responsible for this steep decline. Furthermore, the US Fed's interest rate hike is another factor explaining this different price action. As rates rise, investors' appetite for riskier assets like cryptocurrencies shrinks.
Nonetheless, Hayes noted that some savvy investors could take advantage of current cryptocurrency market conditions to increase their holdings in BTC. Every drop in the BTC price has seen many BTC holders try to reduce their losses by liquidating their BTC portfolio.