Bitcoin’s correction can just get started. In fact, the crypto sector as a whole could face a severe downward attenuation reminiscent of 2022.

“I could see us going back to a five handle by the end of the year,” Quinn Thompson, founder of Crypto Hedge Fund Lekker Capital, told Coindesk in an interview. A “five handle”, ie A price between $ 50,000 and $ 59,999 would be essentially down from the already shaking current level of $ 83,000 and approx. 50% drop from Bitcoin’s peak just over $ 109,000 just more than two months ago.

“I don’t think it happens quickly, which is why it would be very painful and shocking to people because nothing about the current market conditions is very unstable, with great liquidations and crashes,” Thompson added. “It’s this kind of different market environment, a slow grinding that is almost more unbearable to people because they are like,” is it over? Is the bottom in? “

Thompson, who had been Bearish from much higher levels, has repeatedly called the White House Crypto-Messages-be it Sovereign Wealth Fund or Strategic Bitcoin Reserve, or something in between “Nothingburgers” and “Sell the News” events. He has also claimed that the strategy’s (Mstr) constant Bitcoin buyer is not necessarily bullish for cryptocurrency as they appear to be the only significant bid.

The four headwinds of the economy

The key to Thompson’s dissertation is the idea that the various policies of the Trump administration are likely to hurt the economy in the next six to nine months.

First, the Department of Government Efficiency (DOGE) is in its efforts to reduce the US deficit bent by cutting down on public spending – which has been one of the greatest drivers for job growth in recent years. The labor market was already vague when the Biden team handed over the reins to Trump, Thompson said, and the new government’s fiscal arm is not interested in supporting things anymore.

“People are caught by politics for it,” Thompson said. “We may disagree on whether or not we need the Ministry of Education. But these dollars were printed and went into people’s pockets, and these people spent them and went on vacation and to the grocery store. So it was positive.”

Elon Musk, the main force behind DOGE, said last week that he was intended to cut down on $ 1 trillion in public spending at the end of May; He also said he would cut down 15% of the government’s annual expenses, which means almost $ 7 trillion.

Even if DOGE fails his declared goal and only manages to cut back, hundreds of billions say over four years, the major cuts are likely to occur at the beginning of Trump’s period, not the ending, Thompson argues. This means that Doge’s influence on the economy and consumer mood is likely to be felt in the coming months, whether or not the agency succeeds or not.

Secondly, the crash of illegal immigration at the southern border – combined with the renewed emphasis on deportations – is bound to influence the labor market, Thompson said. Migration is positive growth because it puts pressure on wages; If this working pool dries up, workers require higher wages that some companies cannot afford.

Thompson’s third edition is Customs. The Trump administration continues to change its customs threats on the daily basis, sometimes promising new ones, sometimes throwing them off, casting doubts as to whether the majority of the proposed duties will actually ever come into force. But the important thing about duty is that they create uncertainty for companies that can choose to delay investments or hire decisions until the customs situation is resolved.

Finally, it does not appear that the Federal Reserve is busy loosening financial conditions because inflation data has not been great. The US central bank cut interest rates by a full percentage point at the end of 2024 to 4.25%-4.5%, and even it wasn’t enough to push Bitcoin over $ 110,000. Thompson says he expects Fed to cut anywhere between 25 and 75 basic points in 2025, but that these cuts will be spread in the second half of the year.

“I think there is much more coordination that takes place between the Treasury and Fed than people would think,” Thompson said. “People believed Trump and [Fed chair] Powell would chef, but they are actually kind of on the same team right now. [Secretary of Treasury] Bessent and Trump bring down growth and it helps Powell achieve lower inflation. “

When will the bottom be?

With such headwinds working against risk-on-assets such as shares and Bitcoin, the crypto sector is unlikely to have a good year, Thompson said. The fact that the White House doesn’t seem too concerned about a potential recession is also a strong signal, he said.

“Bessent comes in and says, ‘We have to fix the ship.’ And correcting the ship means cutting off the juice that drives these crazy asset prices.

But how long is it likely that Trump will maintain course? Until it gets too painful, and even Trump’s political base asks him to cut it out, or until the beginning of 2026 – you can’t push a country into a midterm election recession.

“I equate this to a controlled combustion. They try to clearly clear the brush so that it does not become a bigger problem. But sometimes controlled burns become forest fires,” Thompson said. “I think it will be a long kind of beat through the year as they try to adopt these policies.”