How Much Can Bitcoin Go Down? – Forbes consultant

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The cryptocurrency markets have had a tough year marked by brutal sell-offs.

The value of the global cryptocurrency market has dropped from a peak of over $ 2.9 trillion in November 2021 to around $ 1 trillion today.

Bitcoin remains the largest and most popular cryptocurrency in the world, with a market capitalization of $ 433 billion. But he was not immune to the market weakness.

After hitting a new all-time high of $ 68,789 in November 2021, the price of Bitcoin dropped to $ 17,708 in June 2022. Since then, Bitcoin prices have bounced above $ 22,600.

Bitcoin bulls are hopeful fears of destabilizing stablecoins and contagion in the crypto loan market, but some analysts say Bitcoin still has room for the downside before the end of the year.

What is the “real” bottom of Bitcoin?

Bitcoin prices have fallen by more than 67% from their 2021 highs.

Such severe sales are nothing new in the cryptocurrency market. The cryptocurrency plummeted around 80% from its 2017 highs in 2018 and then climbed back to new all-time highs in 2020.

However, there are several key differences between the 2018 Bitcoin sell-off and the crypto winter of 2022. The 2018 sell-off was largely driven by panic selling and margin calls on retail investor positions.

The 2022 sell-off was exacerbated by concerns about contagion threatening the stability of the entire cryptocurrency market. Cryptocurrency lending firms Voyager Digital and Celsius Network have all recently been forced into bankruptcy after facing severe liquidity crises.

Additionally, investors have lost confidence in the stablecoin market in recent months following the collapse of TerraUSD (UST) in May.

Bitcoin Value: BTC is difficult to value

Bitcoin generates no cash flow, revenue or earnings and is not backed by any intrinsic value assets. So it can be difficult for analysts and other experts to assign an appropriate value or price target for the cryptocurrency.

Bitcoin bulls argue that, like gold, Bitcoin’s value is tied to its scarcity, as crypto has a fixed limit of 21 million total coins.

A fixed supply and no intrinsic value means that Bitcoin prices are determined solely by market demand, making investor sentiment in the cryptocurrency market the most important element in predicting where Bitcoin prices are headed.

Some analysts rely on technical analysis of the Bitcoin price chart to determine important short-term support and resistance levels, including a potential price level for the Bitcoin low.

What is Bitcoin’s breakout price?

Julius de Kempenaer, senior technical analyst at StockCharts.com, says the Bitcoin chart suggests that a breakout price above $ 22,500 could take Bitcoin to its next resistance level of around $ 27,500. However, the upside beyond that point could be difficult.

“The long-term trend for BTC is still down after breaking support around $ 30,000, which at the same time marked the completion of a big top formation,” says de Kempenaer.

He also says he’s still not convinced that Bitcoin’s low has yet come, as the selling pressure in Bitcoin appears to be strong and “ease of movement” is the downside for now.

“Would you [$17,500] to mark the minimum for BTC? I’m not so sure, “he says.” I’m watching [$12,500] as a potential long-term goal “.

Does inflation create problems for cryptocurrencies?

Another key difference between the 2018 Bitcoin sell-off and the 2022 cryptocurrency winter is the macroeconomic environment.

In 2022, the Federal Reserve aggressively raised interest rates to fight the highest U.S. inflation in decades.

Bitcoin prices could easily drop to new lows if the macroeconomic environment were to deteriorate further, experts say.

While bearish news is already built into Bitcoin’s price, more drops may be possible, especially if inflation rises faster than expected.

Inflation was a key component of the crypto winter of 2022, and investors tend to offload higher-risk assets as the Fed raises interest rates to cope with inflation. The correlation between Bitcoin’s prices and the S&P 500 has also been extremely high this year.

Daniel Rodriguez, accredited investment trustee and chief operating officer of Hill Wealth Strategies, says bitcoin prices have the potential to drop even lower.

“Whenever interest rates go up or the Fed announces plans to hike rates, Bitcoin goes down sharply almost instantly,” says Rodriguez.

Anthony Rousseau, Senior Director of Product Strategy at TradeStation Crypto, says the 2022 Bitcoin low will be closely tied to Fed policies.

“If the Fed continues with its published plan, I think it will likely see continued US dollar strength and bearish pressure on risky assets like Bitcoin,” says Rousseau.

According to CME Group’s FedWatch Tool, the bond market is currently pricing in a more than 66% probability that the Fed will raise interest rates by at least another 2% by the end of the year.

Risk tolerance in Bitcoin investments

Bitcoin may have taken a hit so far in 2022, but cryptocurrency remains one of the best long-term investments on the market in recent years.

Bitcoin prices have still risen by more than 110% in the past three years and by a whopping 740% in the past five years.

Critics of Bitcoin’s potential to serve as a real currency have long pointed out its shortcomings as a stable store of value.

While it may appear that Bitcoin’s 52% year-to-date decline is extreme, volatility is quite typical for Bitcoin. The original cryptocurrency hasn’t completed a calendar year without an annual gain or loss of at least 60% since 2015.

The volatility of bitcoin creates extreme risks for investors, especially when using margin.

BTC may seem cheap, trading at around $ 22,600 today compared to $ 60,000 a few months ago. But given the ongoing macroeconomic uncertainty, including persistently high inflation and rising interest rates, cryptocurrency winter may still be far from spring.

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