Bitcoin's record rally could hit a wall in 2021.
Signs in the cryptocurrency's technical chart point to a 25%-30% sell-off that's likely to hit early in the new year, Miller Tabak chief market strategist Matt Maley told CNBC's "Trading Nation" on Thursday.
Bitcoin broke above the $23,000 level for the first time on Thursday, building on a massive, 215% year-to-date rally.
"There's no question it's been a melt-up, and it could last a little bit longer," Maley said. "I think on a short-term basis it could continue a little bit longer, and I'm very bullish on it on a very long-term basis. But intermediate term, I'm a lot more concerned than I think a lot of other people."
Part of the problem is the market's excess liquidity, Maley said. Over the summer, that sideline money fueled the mega-cap tech rally; now that those stocks have stabilized, it's driving bitcoin, he said.
"The problem is it's now taken the weekly [relative strength] chart on bitcoin to a very, very high level," he said.
"It's above 88 [as of Thursday]. That's not quite up to the 90 level that it reached twice in 2017, but those were followed by declines of 36% and 64%," he said. "We're not quite there yet, ... but as the pandemic starts to fade a little bit [and] maybe that liquidity becomes a little less plentiful, this stock could get clobbered like it has many other times in the past."
He noted that just since 2016, bitcoin has seen 10 declines of 20% or more, seven declines of 30% or more and four declines of 48% or more, adding that investors shouldn't underestimate its pattern of volatility.
"People need to be careful as we move into the new year," he said. "I love it long term, but I think it's going to be a much deeper sell-off than the 10%-15% ones we've seen more recently. I think you're going to see 25%-30% easily. Again, I don't think that really starts until early in the new year, but I do think it's coming soon ... based on this overbought condition and the froth that we've seen in this asset class in the last week or two."
Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, said he would suggest holding on for the long term, volatility and all.
"It took me a little while to get on this train, but I think it really is the new currency," he said in the same "Trading Nation" interview. "If you have that long-term perspective, three-, five-, seven-year perspective, you just hold onto it."
Bitcoin has become a global currency, a hedge against inflation and something of a "new commodity" in this market environment, Bapis said, comparing its triple-digit rise this year with gold's 24% gain.
"Lastly, it's become a part of a balance sheet reserve for some of these big companies," he said. "PayPal is now accepting bitcoin as a global currency ... starting in 2021. Square has made a massive investment into bitcoin, and it's also using bitcoin for its reserve on the corporate balance sheet. ... Blockchain, we all know that that's the real technology and it's here to stay, and I do believe bitcoin is a leader in the global currency, cryptocurrency side of this for as far as we can see."
"I just think you own it and put it away for a long-term investment and watch how it maybe transforms the currency and the world we live in today," Bapis said.