Bitcoin’s price has been on the decline since early November 2021, when it hit its all-time high of $69,000 (AUD $94,750). Since then, it has sunk as low as $33,503 (AUD $4,697), which occurred on the 24th of January. Since then, however, it has been increasing in price. Today, at the time of writing, on the 8th of February, it is sitting at $44,155 (AU $61,892) in price.
So: is Bitcoin going to continue stabilising (or increasing) in price? Is Bitcoin going to plunge even further (say, back to $10,000 per Bitcoin, as one prominent investor gloomily predicted last year)? Or is this is all fun and games in a notoriously volatile market?
First, let’s look at why it might have dropped. First of all, it should be pointed out that crypto has a natural cycle where people have a tendency to sell soon after assets hit record highs (which Bitcoin did in November).
Even before this latest drop first started to really fall, the market had, in hindsight, warning signs. Forbes reported on December the 3rd, 2021, that Bitcoin and other crypto prices had fallen sharply, wiping around $300 billion USD off the combined crypto market in just two days.
Bitcoin was trading as high as $69,000 just weeks before that. So it fell by about 30% in that moment, and in the following weeks up until January the 11th, shed almost half its value.
Bitcoin’s drop was followed by serious slumps in other prominent tokens, including Ethereum, Binance’s BNB, Solana, Cardano and Ripple’s XRP.
But why did Bitcoin itself drop?
The Bitcoin price plunge of December 2021 came alongside some large stock market declines, as well as a warning made by big wig investor Louis Navellier that Federal Reserve tapering could pop the Bitcoin and crypto bubble.
“The Fed is tapering, and this should create a correction in risk assets, of which Bitcoin is a part,” Navellier said, according to an article published by Business Insider in December.
“The more the Fed tapers, the more volatility we should see in both stocks and bonds—and yes, bitcoin, too.”
The Fed is now beginning to “taper” its money slinging, following a hard rise in inflation and a recovering labour market.
While some believe there is still plenty of money sloshing around, even though the Fed is beginning to taper, and doubt the Fed will let markets ever fall too far, others are making more dire predictions.
Navellier, for instance, warned that Bitcoin could fall to $10,000 per Bitcoin, a stinging decline of 80% from its all-time high set last month of almost $70,000 (Bitcoin hasn’t been as low as $10,000 since September 2020).
“I would take a decline below $46,000 (the 200-day moving average) to be a yellow flag and a decline below the spring low of $28,500 to be a completed massive double top which points to a decline to below $10,000, which incidentally would match many of the multiple 80%+ declines in its storied history,” Navellier wrote, according to Business Insider.
Forbes reports: “The Bitcoin price has recorded similar such declines in the past, although bullish bitcoin and crypto investors remain confident Bitcoin’s price is going far higher in coming years.”
Business Insider reports: “While Navellier is making a dramatic prediction, Bitcoin has endured a few 80% dives before, the most recent of which started in December 2017 and spanned most of 2018. There were plenty of causes, including the government’s refusal to allow a Bitcoin ETF to trade, fears about hacks, and warnings from prominent investors like Warren Buffett.“
The Sun reported in December that Bitcoin’s rapid decrease in price had come after China has “ramped up its clampdown on Bitcoin mining, which helped cause the last crash earlier this year.”
“The omicron variant has also led to risk aversion over concerns about what it might mean for global economic reopening in the coming months,” The Sun reported, too.
Bitcoin’s crash also comes a few weeks after Twitter’s CFO Ned Segal said he wasn’t down with investing Twitter’s corporate cash in crypto right now.
The Wall Street Journal reported in November that in an interview Segal said: “We [would] have to change our investment policy and choose to own assets that are more volatile,” adding that Twitter prefers to hold less volatile assets (like securities) on its balance sheet.
Additionally, The Wall Street Journal reported that Twitter is “assembling a team called Twitter Crypto to look into ways to help creators on the app to earn money or accept cryptocurrencies such as bitcoin for payment, and other ways to use blockchain technology.”
The Wall Street Journal also cited a bunch of other tech companies which have disclosed they do hold crypto assets, like Tesla and Square.
Watch Elon Musk and Mark Cuban discuss the potential real-world applications of meme coin ‘Dogecoin’ in the video below
On that note: though there’s a long way to go before taming this wild west, certain aspects of the crypto world have achieved some milestones of late in terms of legitimacy, leading many to become frustrated (see Jordan Belfort’s recent comments) with the hype around sh*tcoins giving the industry a bad name, and calling for more regulation to drive the space forward.
This in mind, if you have faith Bitcoin will bounce back, and you are a long term believer, this could indeed be a good time to buy (so long as you are prepared for volatility and worst-case scenarios and can afford to lose everything you put in).
If you are a short term investor, however, then you are heading into the unknown with not even a shred of a compass (i.e. gambling). This is because there’s no way of knowing if Bitcoin is going to fall further, or bounce back, in the coming days and weeks.
Some were quite bullish in January, in one of the moments when Bitcoin looked like it was starting to recover (before, ironically, it fell even lower again).
One – Hong Fang, who is the CEO of a cryptocurrency exchange – told CNBC recently that despite the uncertainty currently surrounding Bitcoin: “I still believe that the $US100,000 price point is reasonable.”
Even among crypto believers, there is much disagreement about the future’s likely winners. Some people believe Bitcoin and Ethereum will always be the benchmarks and stores of wealth (more so Bitcoin than Ethereum), even if newer tokens outmanoeuvre them in certain ways (like speed and environmental bonafides). Others, meanwhile, are searching further afield into (lesser proven) disruptors like Nano, Solana and Cardano.
Disclaimer: This article is intended for informational purposes only. This is not financial advice. Never invest more money than you can afford to lose into any crypto.