Is Bitcoin’s Biggest Price Drop Yet To Come?

by James · August 29, 2022

It’s been a tough year for Bitcoin investors, with the cryptocurrency pulling back significantly from its all-time high of $68,990.90 in November.

The largest cryptocurrency on the market staged a recovery in recent weeks as part of the summer stock rally after falling to $17,581 in June.

However, it has fallen back below the key $20,000 level and there are fears among analysts that the price could fall much further this time.

In 2020, Bitcoin increased by 292 percent and by 59 percent in 2021.

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What has caused the latest fall?

Bitcoin, which has a market capitalization of $954.51 billion, fell below $20,000 over the weekend after US Federal Reserve Chairman Jerome Powell warned against premature easing of monetary policy and reiterated that the central bank would continue to raise interest rates to curb inflation, which hit a 40-year high in June.

Global cryptocurrency and stock markets fell on the news. Bitcoin fell another 2.3 percent on Monday to $19,527, marking a fifth consecutive day of declines.

“In recent times, the price of Bitcoin has developed a strong link with the Federal Reserve’s monetary policy, so that when the Fed tightens policy, the price of Bitcoin falls,” said Naeem Aslam, market analyst at Avatrade.

“This association between the Federal Reserve’s monetary policy and the price of Bitcoin has become stronger in recent times, and is a big reason why the price of Bitcoin crashed from its all-time high.”

Investors and traders were calmer when prices hovered around $25,000 earlier this month, but with bulls failing to drive prices higher, “many market participants fear the worst of the sell-off is yet to come as a result of this”, said Mr .said Aslam.

How Far Can Bitcoin Fall?

It looks like a return to the lows recorded in June after Bitcoin broke through the $20,000 support level over the weekend, according to analysts.

“The sell-off in stocks should push Bitcoin further down,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The next natural target for Bitcoin bears is near $17,500, the June dip, then the $15,000 level, next psychological support.”

Fairlead Strategies’ Katie Stockton sees long-term support between $18,300 and $19,500, Bloomberg reported, while Fundstrat strategist Mark Newton flagged some key areas in the $19,000 range, with a “real area of significance” around $17,500.

“The 15,000 and 13 million dollars [$13,198k] price points will be the main focus and attract some offers, Aslam said.

If Bitcoin’s price approaches the September 2020 low of $10,760, “there will undoubtedly be a lot of interested buyers”, he added.

For traders, the 50-day simple moving average is a key level to look for when trying to decipher the direction of the trend in the market, he said.

However, if the price trades above this average, bulls are in charge of the market and the odds favor higher highs. When the price falls below this important moving average, it is usually safe to assume that the bears have taken control of the market, he said.

Bitcoin is trading below its 50-day simple moving average but above its 200-day simple moving average.

“As a result, BTC bulls are still holding out hope that the recent breakout is false, and if the price holds above $20,000, there is nothing to stop it from continuing its ascent.”

Why Did Bitcoin Fall to $17,000 in June?

It was down to FUD – or “fear, uncertainty and doubt,” an acronym used by cryptocurrency enthusiasts to dismiss negative information – that can lead to panic selling.

That was against a backdrop of 40-year high inflation, rising interest rates, recession fears and the collapse of the stablecoin Luna when it broke free from the US dollar and wiped out more than $17 billion in cryptocurrency value in May.

How is Ether doing?

It’s a tough ride too. The second-largest cryptocurrency fell 4.1 percent on Monday to $1,422.67, continuing a decline from around $2,000 a couple of weeks ago. It has been fluctuating ahead of the long-awaited Merge upgrade, due in mid-September. It has fallen 61 percent this year from $3,769.70 on January 1.

The upgrade is set to move Ether to a more energy efficient and environmentally friendly system.

It currently uses about 45 terawatt hours of electricity a year, and experts estimate that the upgrade will use 99 percent less energy than the current setup.

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