Bitcoin and Ethereum may have found a bottom to their recent losses, says Arthur Hayes, co-founder of crypto exchange BitMex.
Hayes said in a blog post that Bitcoin’s bottom range is between $25,000 to $27,000, while Ethereum will find support between $1,700 to $1,800.
But Hayes noted that neither token is ready to recover drastically yet. Pressure from the Federal Reserve’s rate hikes, plus rising inflation are expected to keep market sentiment subdued.
The BitMex founder outlined a scenario in which Bitcoin and Ethereum could launch a recovery. But such a scenario will take time to play out.
Weak hands will need to be excised before a recovery
Hayes said that a main factor weighing on Bitcoin and Ethereum is that most short-term holders are trading at losses. Such traders will sell to reduce losses, rather than hold until profitability.
As such, any recovery in the market could be swiftly stymied by sellers exiting their positions to regain some value.
This choppy price action will eviscerate the capital of short-term traders who half-heartedly believe this is the bottom. These folks want to catch the knife and exit for a quick profit.
Regarding his prediction on the Bitcoin bottom, Hayes said Terra’s recent sale of 80,000 Bitcoin to support its stablecoin had already taken much selling pressure off the token.
Additionally, Hayes said that a recent divergence between crypto and stock markets also indicated that a bottom may be in sight.
When will a Bitcoin and Ethereum recovery occur?
While not giving an exact timeframe, Hayes said that the market will only begin recovering after short-term traders have been relieved of their capital.
He advised traders to be patient with the market, stating that only after short-term traders have left the market can “diamond-handed apes” return to active trading.
Hayes also stuck to his earlier forecast that Ethereum will clear $10,000 by the end of the year. Still, he predicts far more market volatility in the interim, as the Federal Reserve tightens monetary policy.
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