“Bitcoin could see a 90% drop after the peak of this cycle”: SwissBlock
The bitcoin fever (BTC), which has captivated investors and speculators, could be on the verge of a monumental collapse.
Henrik Zeberg, chief economist at SwissBlock, a market analysis firm, warns that the digital currency is not the haven that many believe, but a high-risk asset whose correlation with stock markets, especially the Nasdaq, could drag it into a devastating fall.
Zeberg points out that financial markets are inflated to levels never seen. The ratio of market capitalisation of assets to GDP is 226%, surpassing 136% of the dotcom bubble in 2000 and 107% in 2007.
In 1929, the market collapse after the stock market crash resulted in an 86% drop. The current so-called bubble, even without cryptocurrencies, stands at 215%.
The following graph shows how the Nasdaq has skyrocketed 21-22 times since 2009, but with a negative divergence in the RSI, indicating a loss of momentum. This means that, although the price continues to rise, the underlying market momentum is waning, a classic warning sign ahead of a possible change of trend.
“We are in the biggest bubble in history,” says Zeberg, who projects a possible Nasdaq increase to 27,000-28,000 points before a collapse. When this happens, expect a 75-80% drop in the index, comparable to or worse than that of dotcoms.
Stressful Correlation with the Nasdaq
Bitcoin, far from being a cover against market falls – according to the analyst – moves in tandem with the Nasdaq and the S&P 500, as seen in the graph.
Zeberg highlights a strong correlation between 60 and 100 on the scale, where assets rise and fall together. In 2020, the Nasdaq fell 28 per cent during the COVID-19 crisis, while bitcoin plummeted 63 per cent.
Between 2021 and 2022, the Nasdaq lost 38%, and bitcoin 77lost %. If the Nasdaq falls 75-80% in the next collapse, Zeberg estimates that bitcoin could plummet 90-95%, amplifying losses due to its high volatility.
Therefore, it rules out that Bitcoin is a reserve of value. It’s a risk asset that will surpass the Nasdaq downwards after a possible “blow-off top,” he explains. This term describes an extreme speculative peak before a collapse, a phenomenon that Zeberg sees as likely after a new historic peak in bitcoin.
Liquidity: Save lives or mirage?
The rise of bitcoin is attributed, in part, to the increase in M2 liquidity, the monetary mass that includes cash and bank deposits.
However, Zeberg warns that liquidity does not always protect. During the dotcom bubble, the Nasdaq fell 85 per cent and the S&P 500 collapsed despite the M2 rise.
This graph shows the Nasdaq adjusted by M2. That is, it tries to represent the real value of the Nasdaq, considering the liquidity of the system. On the left side, the peak of the dotcom technology bubble is observed around 2000.
The graph shows the Nasdaq’s trajectory discounting M2 liquidity. We see that, although the nominal Nasdaq has risen a lot, when adjusted for liquidity, the index has surpassed or is reaching the peak of the dotcom bubble. This suggests that if the peak of 2000 was a massive bubble, what we are seeing now, adjusted by M2, is equally or more worrying.
The same was true of the 2008 financial crisis. Markets will crash when the real economy crashes into a wall, he says, predicting a recession that will drag bitcoin.
With technical patterns showing a bullish divergence and a possible new maximum on the horizon, Zeberg insists that collapse will be inevitable. It is not based on beliefs, but on historical correlations, he concludes, projecting a scenario where bitcoin could lose almost all its value after the peak of this bubble.
A bullish vision with a warning
Willy Woo, an analyst and contributor to SwissBlock, offers a complementary but also cautious perspective. He argues that bitcoin is in the final stage of its bullish market, preparing to reach new historic peaks.
As CryptoNews reported, Woo said that there is still a tour of new climbs, anticipating a new maximum in the short term. Woo points out that bitcoin’s risk model is high, but below its peak, indicating that the currency created by Satoshi Nakamoto passes the final stage of its bullish cycle.
However, it also foresees a big drop after these peaks, coinciding with Zeberg. The analyst warns: “We expect a BTC bearish market once global macroeconomic markets change. This is because many investors see bitcoin as an asset at risk, preferring stable macroeconomic environments and seeking refuge in instruments such as Treasury bonds during turbulence.
The debt of the United States. U.S. and the potential for Bitcoin
Not everyone shares Zeberg’s pessimism. America’s growing debt, which has increased by $1 trillion every five months due to fiscal deficits and massive spending during the pandemic, reinforces the bullish case for bitcoin.
Michael Saylor, CEO of Strategy, describes it as “perfected, programmable, and incorruptible capital.” For him, understanding his value leads to a vision for 10 years, not short-term. Time rewards those who understand how much bitcoin is really worth, he says.
Saylor adds that bitcoin will not only surpass the S&P 500 but will grow faster than gold, positioning it as the supreme asset of this era. For his part, Jack Mallers, CEO of Strike, warns against confidence in the trust in the Fed’s money. The party hasn’t even begun, he says, suggesting that the real bitcoin rally is coming.
Analysts such as Polina and Anthony Pompliano highlight the progressive deceleration of bitcoin from traditional markets, driven by their limited offer to 21 million units, their resistance to censorship, and their ability to offer privacy. These characteristics make it attractive in crises where governments could confiscate funds, benefiting, along with gold, from uncertainty and devaluation of fiat currencies.
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