Crypto Hedge Fund Star Predicts Bitcoin Drop Below $60K

Key Takeaways:

• Trump’s deficit-cutting policies could hurt risk-on assets, says Lekker Capital’s Quinn Thompson.

• The administration is expected to maintain these policies until markets capitulate or midterms approach.

• The decline is likely to be a slow, grinding drop rather than a sharp crash.

Bitcoin's downturn may be far from over, with the broader crypto market potentially facing a steep decline similar to 2022.  

"I could see us dropping back to the $50K range by year-end," said Quinn Thompson, founder of crypto hedge fund Lekker Capital. A move to this level would mark a significant drop from the current $83,000 price and a nearly 50% decline from Bitcoin’s peak above $109,000 just over two months ago.

"I don’t think this will happen quickly, which makes it even more painful and surprising," Thompson explained. "The current market isn’t highly volatile with major liquidations or crashes. Instead, it's a slow, grinding decline—almost more unbearable because investors keep wondering, ‘Is it over? Has the bottom been reached?’"

Thompson, who had been bearish from much higher levels, has consistently dismissed the White House’s crypto-related announcements—whether about the Sovereign Wealth Fund, Strategic Bitcoin Reserve, or other initiatives—as insignificant and “sell the news” events. He also argues that Strategy’s (MSTR) continued Bitcoin purchases don’t necessarily signal bullish momentum, as they appear to be the only major source of demand.

Key Economic Headwinds

At the core of Thompson’s outlook is the belief that Trump administration policies will weigh on the economy for the foreseeable future.

• Government Spending Cuts – The Department of Government Efficiency (D.O.G.E.) is prioritizing deficit reduction by scaling back government spending, which has been a major driver of job growth. Thompson notes that the labor market was already in a fragile state when the Biden administration transitioned out, and the new fiscal policies are not focused on providing support.

• Impact on Growth – “People get caught up in the politics,” Thompson said. “We can debate the necessity of certain government programs, but those funds were being printed, flowing into people’s pockets, and fueling consumer spending, which contributed to economic growth.”

• Musk’s Budget Cuts – Elon Musk, the key figure behind D.O.G.E., recently emphasized his commitment to significantly reducing government spending in a short timeframe, with broader plans to implement even deeper cuts.

Even if D.O.G.E. doesn’t fully achieve its goals and only manages to reduce spending by a fraction over the next few years, Thompson believes the most significant cuts will likely happen early in Trump’s term, not at the end. This means that the agency's influence on the economy and consumer sentiment will likely be felt soon, regardless of its success.

Secondly, Thompson points to the government’s crackdown on illegal immigration and its focus on deportations, which he believes will impact the labor market. Migration has historically been positive for growth by putting pressure on wages, and if that labor pool shrinks, workers may demand higher pay, which some businesses may not be able to afford.

Third, Thompson highlights tariffs as a concern. The Trump administration’s shifting stance on tariffs, with occasional threats followed by cancellations, creates uncertainty for businesses. This uncertainty may lead companies to delay investment or hiring decisions until the situation becomes clearer.

Finally, Thompson notes that the Federal Reserve doesn’t seem eager to loosen financial conditions quickly, given the ongoing inflation issues. Despite a significant rate cut at the end of 2024, which didn’t push Bitcoin above $110,000, Thompson expects the Fed to continue cutting rates gradually in 2025, but these cuts will likely be spread out over the second half of the year.

Thompson believes there’s more collaboration between the Treasury and the Fed than most people realize. "People expected Trump and Fed Chair Powell to clash, but they’re actually aligned," he said. "Bessent and Trump are intentionally slowing down growth, which in turn helps Powell reduce inflation."

When Will the Bottom Be?

Given the challenges facing risk-on assets like stocks and Bitcoin, Thompson doesn’t expect the crypto market to perform well this year. He also notes that the White House’s lack of concern about a potential recession indicates that the economic slowdown is part of the plan.

"Bessent is coming in with a strategy to 'right the ship,'" Thompson said. "And that means cutting off the excess that’s been inflating asset prices. The inevitable outcome of their policies will be a drop in the stock market."

As for how long Trump will continue with this approach, Thompson suggests it will last until it becomes too painful, or until early 2026—since pushing the country into a recession just before the midterms would be politically risky.

Thompson compares the situation to a controlled burn: "They’re trying to clear the brush to prevent a bigger issue down the line, but sometimes those controlled burns end up becoming wildfires." He believes it will be a long, slow process as they continue to implement these policies.