A big part of the downturn in BTC's price is that liquidity is being sucked out of the system to an extent even larger than is generally realized. The world is starved for liquidity. I expected a crash like this:
I'm bearish for the first half of the year because most of the world is transitioning from unprecedentedly easy money to, relatively, extremely tight money, and crypto feeds off of easy money more than anything. People talk a lot about interest rates, but it's that plus slowing growth, much lower government spending, and rapidly ending QE. Worldwide, the brakes have already been slammed on the economy, but people haven't quite realized it yet. I think that sometime in the first half of the year all liquid assets including BTC are likely to fall off a cliff. It then might quickly recover within days, or this might lead to a frenzy of panic selling which lasts a couple of months. I think that this crash will be an excellent time to buy, though, and we could see ATHs toward the end of the year.
My record of price predictions isn't great, and so I don't personally make large bets based on my price outlook. My prediction above will definitively be wrong if we get to July without a major crash, or if interest rates peak and then start to constantly fall without a crash in liquid assets.
When central banks add liquidity, they add
bad liquidity. It gets thrown at useless things like wasteful government projects and zombie companies. But even with rates at 0%, credit is still either completely unavailable or very expensive to disfavored industries, people without the right connections, people in disfavored countries, most projects without collateral, etc. If you had some great business idea, do you think that
you could get a big loan for it? The lack of
good liquidity is a form of tightness which has been strangling the world economy. So when central banks and governments stop doing incredibly-loose things like sending people checks and start mildly tightening monetary policy, we get tightness
on top of existing tightness. The world can't handle it.
Crypto is one possible solution to the liquidity crisis, since it offers a form of liquidity that's available to those that are excluded from the USD system (eg. El Salvador). I haven't personally experimented much with DeFi stuff, and I think that 90% of it is probably a scam, but this area has major potential vis-à-vis the liquidity issue, and BTC is the best monetary base for a DeFi monetary system. This can add the "good" liquidity that the world is starved for, having been fed only central banks' "bad" liquidity for years.
The recent crash is basically what I expected: a liquidity crisis causing almost every liquid asset on Earth to crash. But I expected it to be worse, and in fact I expected it to be so bad that it would cause the Fed to stop tightening. This crash wasn't nearly bad enough to make them hesitate, especially with inflation so high (higher than I expected in January). I suspect that we'll get one or more additional rounds of liquidity-crisis selling like this, though I'm not sure.
If things get so bad that the Fed stops tightening, that's good for BTC because BTC feeds on easy money. But if the Fed is seriously going to let rates go up several more percentage points, then BTC probably has a lot more to fall. We'd have to eliminate the portion of the price which comes from easy money and FOMO-buyers before rising on other fundamental strengths. In that case, I'd expect BTC to keep falling until monetary policy becomes restrictive across the board (ie. rates +/- other effects such as the balance sheet put us above the neutral rate, in nearly every sector and situation). After that point, I'd guess that further rate increases would not be particularly harmful to BTC, and could in fact help BTC. In other words, even if the Fed keeps tightening, I think that BTC can still perform well,
eventually.
At the moment, my base case for the second half is that the liquidity crisis builds to such an extent and causes so much pain that the Fed seizes on some excuse such as a
deceleration in CPI (but still staying very high), and they stop tightening. This will be bullish for BTC in several respects: easy money will flow into BTC, the Fed's failure and increasing financial repression will undermine the USD, inflation will boost the "BTC as an inflation hedge" narrative (even though it hasn't actually worked recently), and BTC+DeFi as a new global monetary system will emerge as a solution to a major problem. ATHs are still possible this year, but probably more likely is a drop even lower from here (to just under $10k, perhaps?) and then an increase toward the end of the year back to the $30-40k area.
As always, note that my record of predictions is not very good, and I don't personally make large bets based on them if I can avoid it.