Crypto Winter Ending Says Veteran Trader

Bear Market 

Yves Lamoureux made the now-famous prediction that cryptocurrencies were destined for a bear market little over six months ago, just days after bitcoin achieved its highest levels on record at the $69,000 mark.

Lamoureux, the head of macroeconomic research firm Lamoureux & Co and known as the "Canadian Whale," received his call on the dot last November. Bitcoin has fallen more than 56% from its record highs in November to current prices well around the $30,000 mark.

The overall market capitalization of cryptocurrencies has plummeted from record highs well above $3.0 trillion to current values around $1.28 trillion, a 58 percent drop.

A steep spike in both short- and long-term US rates (which boosts the opportunity cost of holding non-yielding assets like precious metals and crypto), as well as a dramatic drop in US tech stock valuations, have weighed heavily on crypto (crypto has become increasingly correlated to US tech in recent months).

A quick hawkish turn by the US Federal Reserve has sparked these adverse macro developments. Whereas the central bank believed in November that inflation would be "transitory" and that no rate rises would be required until 2023, it has now acknowledged its mistake.

The bank began a rate hike cycle with a 25 basis point increase in March, followed by a 50 basis point increase earlier this month, and officials have pledged to continue raising rates to combat inflation, which is currently running at a rate more than four times higher than the bank's 2.0 percent target (according to April CPI data).

Is the Crypto Winter Over?

Despite the Fed's continued threat of tighter/faster monetary policy, which many analysts believe will result in more pain in crypto and equities markets and higher US rates, Lamoureux called for an end to the so-called "crypto winter" this week, according to Yahoo Finance.

"I see severe (negative) sentiment among crypto investors, same as we've seen at earlier bottoms," Lamoureux allegedly stated, adding that the 80 percent drawdowns necessary in the past to shake out weak hands are no longer required.

"Instead of one massive fall down, bitcoin split that in two pieces — producing less loss than a regular downturn," Lamoureux said of the last bear market's phases.

Much of bitcoin's decline since November had occurred by mid/late January, with the cryptocurrency just recently breaching below these lows and below $30,000 in the aftermath of the TerraUST and LUNA collapses.

"It seems to be a total bear market," Lamoureux said.

Given the close relationship between the troubled US IT sector and cryptocurrencies, some relief in the Nasdaq 100 index will almost certainly be required if bitcoin and other cryptocurrencies are to make a substantial comeback.

However, Lamoureux is optimistic about US technology. "It's not frequently that I'm totally involved," he added, before adding, "when inflation falls, technology will reflate aggressively... "Beware of FOMO."

Lamoureux recently predicted a three-year bull run in stocks.