May 4 marked a milestone in the downward trend for the stock market after the Federal Reserve announced a 0.5% rate hike, its second increase of this cycle and the largest since 2000. Crypto has been impacted too: As of Wednesday, bitcoin had tumbled by as much as 26% to about $29,500, and ethereum by about 31% to $2,000.
How low both can go is anyone’s guess at this point. But one person who’s nailed it in the past is Richard Heart. The founder of Hex, an ethereum-based token that rewards investors for staking, prides himself with calling the tops and bottoms of the crypto market.
For example, on December 19, 2017, he tweeted that cash was exiting bitcoin, marking the beginning of an altcoin season. This usually follows a cycle that starts with bitcoin’s price peaking and then altcoins before the whole market tumbles. Indeed, bitcoin had been four days into a downward trend that eventually turned into a four-year bear market .
In 2019, he told the audience at a summit that bitcoin would be at $60,000 in a year or two. In November 2021, bitcoin reached its all-time high when it nearly tapped $70,000 before plunging by 56% to date.
He told Insider he uses a combination of technical analysis and fundamentals to predict when market trends will shift. One rule, in particular, is, “buy the rumor and sell the news”. This means periods of speculation about an upcoming event are good times to make bets, but once the news is confirmed, get out.
For example, in 2017, the absolute top for bitcoin was the day the Chicago Mercantile Exchange launched bitcoin futures. A similar event happened in 2021 when the near-absolute top for bitcoin was the day Coinbase listed on the Nasdaq, Heart recalled.
“And so bitcoin moved up big time in 2021 on institutional buying pressure front running the Coinbase listing, and that pumped bitcoin, that pumped the Grayscale Trust, that pumped Coinbase,” Heart said.
By the time a coin reaches the top, everyone has already bought in and there’s nothing left to do but sell, he noted. He compared it to buyer’s remorse. If you’re the guy who won the auction, it means no one was willing to pay more.
Even meme coins follow the same pattern. For example, dogecoin (DOGE) was trekking to its peak when investors anticipated Elon Musk’s mention of the crypto during an episode of Saturday Night Live that he was set to host on May 8. By May 7, DOGE peaked at $0.64 before plunging the following day. To date, it’s still down 86% from its top.
Economic factors could have additional impacts on the crypto market. Inflation could keep crypto from plunging as deep as it has in previous cycles. On the other end, interest rate hikes could cause crypto to plunge even deeper than historically observed, he said.
Another thing to note is that digital assets are speculative and correlated with the stock market. Since you don’t need to buy bitcoin to pay for rent or products, there’s no base demand, Heart said.
“We’re going to keep going down as long as the stock market goes down unless it’s a new project,” Heart said. “Some newer projects will be able to beat the bear market pressure, but the vast majority of assets are going to contract in price as long as interest rates are going higher and the stock market is going down.”
Right now, investors should sit on cash and wait for the bottom, Heart said. While timing any market is incredibly hard for any investor, Heart says the bitcoin bottom can be calculated in two main ways.
The first and best way is after an 80% to 85% dip from peak prices, he said. Historical trends show a gradual increase in bitcoin’s price after a halving event, which is when the amount of BTC per block is reduced. This generally happens every four years and it signals a tightening of supply, followed by a hike in price.
The price continues to rise sharply until bitcoin falls by about 85% from its total value, Heart said. Based on this metric, he estimates bitcoin’s bottom will land somewhere between $10,600 to $10,350. However, in an effort to catch the dip, Heart said $11,000 is a good buy-in.
The second way to know whether it’s time to get back in is when enough time has passed. This is usually 365 days after an all-time high, he said. In December of 2017, bitcoin tapped about $20,000 at its peak before it plunged below $4,000. It wasn’t until March 2019, that is began to climb back above that resistance line.
“I care more about price than time,” Heart said. However, you can’t wait forever, he noted. So if there aren’t newer lows, it’s probably safe to say, that’s the bottom.
Yet even on sale, Heart still considers bitcoin a “trash asset” mainly because its returns wane compared to other digital assets. Specifically, ether has outperformed bitcoin three-to-one, he said. Ethereum’s blockchain also has nonfungible tokens, stablecoins, and developers building on it.
As for ether, Heart believes it’s one of the only cryptos investors should be loading up on during the bear market. He anticipates a bottom at about $750. However, the dip might be a flash in the pan. If you don’t want to miss it, a good buy-in price would be around $1,000, Heart said.
Historically, ether’s tops and bottoms have been steeper than bitcoin’s, seeing lows of about 95% from its all-time high.
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