Cryptocurrencies and related stocks are moving higher on Tuesday after a rough start to the month. But some experts still believe bitcoin (BTC-USD) could start sinking again.
“If we see a break below $81 [thousand to] $80,000…a trap door opens on this thing,” Tom Essaye, Sevens Report Research founder, told Yahoo Finance. “We’ve had a lot of, sort of, late hands come in recently, especially with the advent of these ETFs.”
Bank of America (BAC) recently announced that it will begin covering four bitcoin ETFs in January, recommending a 1% to 4% allocation to the digital assets for its clients.
“If you see investors start tax-loss selling into the end of December, then I think you could easily see this go down into the $70,000s or even the $60,000s very quickly … It really could get ugly.”
Unlike tax-loss selling in stocks, where investors are unable to buy the same or a similar stock within 30 days to reap the tax benefits, crypto investors can sell at a loss, claim the tax benefit, and then repurchase the asset.
Fed Watch Advisors founder Ben Emons believes “the downside range is $55K to $75K, based on past trends.”
He added: “For now, bitcoin is stabilizing but investors closely monitor what is happing with Strategy.”
Strategy (MSTR), which holds about 3% of all bitcoin, has seen a major decline in its stock. Shares are down more than 35% year to date and roughly 60% from their all-time high in July.
The company said Monday that it built a $1.44 billion U.S. dollar reserve to fund future dividend and interest payments.
Strategy CEO Phong Le told Yahoo Finance that the reserve would help address the “challenge” around short-term fluctuations.
“The big challenge people had … was how we’re going to pay the dividends in the short term, if we see volatility in bitcoin, volatility in MSTR,” Le said. “Now we’ve created this US dollar reserve to address that challenge.”
Watch Essaye’s comments below: