Bitcoin under $60 says Cryptohedge Fund Manager for Hot Hands

Bitcoin fixes may have begun. In fact, the entire crypto sector may be facing a serious downtrend reminiscent of 2022.

“We were able to see them return to five handles by the end of the year,” Quinn Thompson, founder of Crypto Hedge Fund Lekker Capital, told Coindesk in an interview. The “five handles,” or priced at $50,000 to $59,999, is down significantly from the already volatile current $83,000, which has dropped by about 50% from Bitcoin peak just over $109,000 more than two months ago.

“I don’t think that’s going to happen anytime soon, so it’s very unstable about the current market situation and it’s a very painful and shocking reason for people because there’s a big liquidation and crash,” Thompson added. “This kind of different market environment, and slow grinddowns are like, “Is it finished? Is there a bottom?”

Bearish from a much higher level, Thompson repeatedly called out the White House crypto announcements — whether it’s a sovereign wealth fund or a strategic Bitcoin reserve, or in between, or a “Nothingburgers” and “Sell the News” event. He also argues that Strategic (MSTR)’s constant Bitcoin purchases are not necessarily bullish for cryptocurrencies as they appear to be the only important bid.

Four economic headwinds

At the heart of Thompson’s paper is the idea that various Trump administration policies are likely to hurt the economy for the next six to nine months.

First, in efforts to reduce the US deficit, government efficiency (DOGE) depends on reducing government spending, one of the biggest drivers of job growth in recent years. The labor market has already wobbled when the Biden team handed over the reins to Trump, Thompson said, and the new government’s fiscal forces are no longer interested in supporting things.

“People get caught up in that politics,” Thompson said. “We can oppose whether we need the Ministry of Education or not, but those dollars were printed and in people’s pockets, and those people spent them, going to the holidays and grocery stores.

Doge’s main force, Elon Musk, said last week it aims to cut government spending by the end of May. He also said he wants to cut 15% of government annual spending, meaning nearly $7 trillion.

Even if Doge fails to a designated target and can cut 10 billion over four years, for example, in four years, Thompson argued that there is a high chance that major cuts will occur at the beginning of Trump’s term. This means that Doge’s impact on the economy and consumer sentiment will likely be felt in the coming months, regardless of whether the institution has actually succeeded or not.

Second, the crackdown on illegal immigration at the tropical border and the new focus on deportation is expected to affect the labor market, Thompson said. Immigrants are putting pressure on wages, which means they are positive for growth. If that labor pool is dry, workers will demand a higher salary, but some companies cannot afford it.

Thompson’s third issue is customs. The Trump administration continues to change tariff threats on a daily basis, sometimes promises new ones, sometimes abort them, and raises doubts about whether a majority of the proposed tariffs will actually come into effect. However, the key to tariffs is that they create uncertainty for businesses and may choose to delay investment and employment decisions until the tariff situation is resolved.

Finally, the Federal Reserve does not seem to be in a hurry to relax its financial position due to the lack of inflation data. The US Central Bank rose to 4.25%-4.5% at the end of 2024, and even that wasn’t enough to push Bitcoin over $110,000. Thompson says he hopes the Fed will cut 25-75 basis points in 2025, but that those cuts will spread later this year.

“I think there’s a lot more adjustments going on than people want to believe,” Thompson said. “People thought Trump and (Fed Chairman) Powell were having an argument, but it’s actually like they’re on the same team right now.

When is the bottom?

Thompson said the crypto sector is unlikely to have a good year as these headwinds oppose risk-on assets such as stocks and Bitcoin. He said the fact that the White House does not seem to be overly concerned about a potential recession is also a strong signal.

“Best has come saying, ‘We need to straighten the ship.’ And correcting the ship means shutting off the juice that works these crazy asset prices.

But how long is Trump likely to keep the course? It got so painful that even Trump’s political foundation told him to cut it off, or until the beginning of 2026 – you can’t push the country into a recession with a medium-term election coming.

“I identify with this with a controlled burn. They’re intentionally trying to clear the brush so that it doesn’t become a bigger problem, but sometimes a controlled burn becomes a bushfire,” Thompson said. “I think it’s going to be a long kind of throw throughout the year as we’re trying to put these policies into place.”