Bitcoin Crash: Should We Expect a Price Rise Very Soon?
Bitcoin, the leading cryptocurrency over the past few weeks has been trading in a rigid spectrum between $ 17,000 – $ 22,000. As it tried to keep up the price beyond $20000 weeks ago, its price almost fell to 5%. Bitcoin has been demonstrating a kind of short-term hint of comeback since it dropped below $ 18000 in December 2020.
Bitcoins’ tight range of price due to May’s inflation report and the Federal Reserve’s decision to raise interest rates by 0.75% have caused stock and cryptocurrency markets to struggle to regain any upward movement that is notable. A new 40-year high inflation and the continuous war in Ukraine are also a point to Bitcoin crash in the crypto currency market.
Bitcoin crashing below $17000 as the leading and popular crypto, is the latest in a sequel of Bitcoin falls in the crypto market. It has seen an alone fall of more than 55% in value over 7 months ago. As investors seem to have panicked as a result of the recent fall, the number of cryptocurrency liquidations has been high.
With Bitcoin price clearly on a downcast trajectory, it is expedient to know what the problem is. In this guide, I will be explaining why bitcoin is crashing, the effect of bitcoin crash, and if you should buy bitcoin in this present fall.
Why is Bitcoin Crashing?
Bitcoin crash popularly refers to a drastic price drop in the price of Bitcoin and it is often unexpected. Although many factors always lead to market crashes, most times, it is as a result of sudden pull out of investors due to unexpected changes in the market. This is the same with Bitcoin.
The main reason for the crash is an ongoing bear market. A bear market is when investors are pessimistic about future growth and stock prices fall. In other words, people are worried about the future of bitcoin and other cryptocurrencies and they’re selling them off to get rid of them before they lose even more value.
Another reason why Bitcoin is crashing might be an announcement made by Celsius Network . Celsius Network is the US cryptocurrency lending platform that allows people who possess crypto assets to lend out and have a high rate on their deposits of fixed financial returns. The lending platform paused all transfers, withdrawals and swaps between accounts stating extreme terms.
It also said it was a move for the entire community to benefit in order to solidify operations and liquidity. This decision, however, has intensified suspicions about the platform liquidity and investors have been taking to their heels from the platform since the announcement. With their price going below $ 1trillion, it has caused a fall across crypto.
Another major reason is the Ukraine-Russian war in which Russia has speculated that the operation of cryptocurrency could come to a halt in her country. Also, China’s recent continuous crackdown on cryptocurrency services has caused Bitcoin to fall lately. Bitcoin crash has also been as a result of ongoing anxiety over the battle with COVID-19 as well as Biden’s current executive order including the latest law actions by the US government.
A lot of new short-term investors are selling off their assets in response to the recent drop in the crypto market which has largely contributed to Bitcoin’s fall over the past few weeks. Also, heightened inflation are also contributing to the bitcoin crash which is making investors continue to stay away from riskier assets and in turn reflecting in the stock market as well.
What’s the Effect of the Bitcoin Crash?
The key to the future of cryptocurrencies is based on how investors respond. The effect of the bitcoin crash is usually seen and felt in how crypto investors react. The first effect of bitcoin’s fall is panic and discomfort from investors where they begin to compare traditional runs on banks to the crash. The case with bank runs is that customers are more worried about banks not being able to give them their money compared to a crash where they worry that their money has become worthless.
A large category of crypto investors in reaction to bitcoin crash also think that their investment is in similarity with stock market crashes. This is where investors worry that their shares and stock may soon be useless.
As the prices of other assets fall and as the US interest rates are high, it has put brakes on the economy. This makes the Bitcoin crash has a psychological effect that is outsized compared to its value.
Investors process this psychological effect as another great piece of bearish news and also relate it to other businesses’ decisions. This decision involves whether to invest, consume or even sell.
Another effect of bitcoin crash is what is referred to as the fear and greed index. Extreme fear has been ongoing in the crypto market for almost 2 months as data has revealed bitcoin crashing to $ 20000. The indicator that measures overall sentiment among investors in the crypto market is this fear and greed index.
There’s a numeric scale that runs from 0 – 100 for representing this sentiment and it has been observed that values greater than 50 mean crypto investors are greedy at the moment. Values below the threshold mean a frightening market and also values below 25 and above 75 means holder sentiments of extreme fear and extreme greed respectively.
A decrease in demand in bitcoins also means that businesses selling goods or services may not see as much profit from Bitcoin transactions as they had hoped. They may choose to stop accepting payments in Bitcoin altogether or raise their prices if they want to stay competitive with other merchants who still accept payments in BTC.
If you’ve been using Bitcoin as an income source, then you may also be affected by a crash in value of this currency. This can happen if you’re working as an independent contractor and accepting payment for your work in BTC instead of dollars or euros — this means that you’ll receive fewer coins than before if the price drops significantly enough compared with fiat currencies like USD / EUR.
Should I Buy Bitcoin Now?
It is extremely important to know what you are investing in and also have a cryptocurrency investment procedure. This is because bitcoin is way too volatile. Also making sure you are not buying bitcoin just because of the fear of missing out is another thing to watch out for in this crash.
If you are looking to buy bitcoin now, you should know that fluctuation is a fraction of it and be prepared for this kind of volatility upfront. Again, buying bitcoin now because the price is low does not mean it won’t fall further. This means you should put in what you are comfortable with losing.
For potential investors who believe in the long-term ability of bitcoin, now could be the astral time for them to move into the crypto market although not without risk. Investors who also believe in the precept of ‘buy the dip’ which is based on the presumption that price drop is a short anomaly for correction over time should be careful and know that buying bitcoin now is a risk.
Well, for one thing, Bitcoin is still growing rapidly each year – especially when compared with traditional currencies like dollars or euros (which have been losing value). And secondly: if you were thinking about investing anyway -be prepared to face the risks.
So should you still buy Bitcoins? Yes! But don’t do it just because everyone else is doing it — do it because you believe in what cryptocurrencies can do for us in the future.
In a nutshell, do not panic about buying bitcoin during the bitcoin crash. Make sure you carefully analyze the market, make consultations with crypto experts and be ready financially in case of loss of assets.
What’s The Future of Bitcoin Like
Since December 25th 2021, bitcoin has not been above $ 50000. despite its rise and fall, the value of Bitcoin price has seen 70% drop since its all time high above $ 68000. Bitcoin still entered 2022 on a high level even though it had a slow start to the year.
Despite the significant fall of bitcoin from its latest all-time high, some crypto experts still believe and expect the Bitcoin price to surge at some point.
Given the recent backdrop in macroeconomics, it is not sure bitcoin will reach an all-time high soon. This is because the investor’s confidence keeps shaking as they are concerned that as the global economy continues to grow, it can enter recession.
The current fall climate is driven by factors bigger than the crypto industry because not only is cryptocurrency affected, but other risk-on assets such as stocks are also not performing well.
With the World of crypto experiencing a crash, it is possible that bitcoin could move toward an all-time high before its next halving event. Most investors believe that the price of Bitcoin can accomplish an enormous growth and also increase between now and 2024, which is the next halving event.
Historically, notwithstanding the price volatility, there is an assumption that is mostly seen in investors’ attitudes. They believe that the price of the asset will increase and will continue doing so which means that the investor doesn’t want to miss out. They consider it as a sure thing and then invest.
Conclusion
In conclusion, cryptocurrency is still considered one of the most volatile instruments for investment purposes despite its volatility and uncertainties, especially Bitcoin. The crypto market is still to remain chaotic in the coming weeks even as countries around the world continue to broadcast high inflation numbers.
Investors that are up to date and have done their analysis can take advantage of the crash because of the current fall in bitcoin prices. In doing this, they should bear in mind not to be quick, and also be aware that risk will be involved. It is also important to investors to know that aside from bitcoin being volatile, lost cryptocurrencies also are unregulated.
This means that not only is their uncertainty confirmed but also means that investors have no protection against fraud. Ensure to invest wisely and safely and also be sure to stay away from greed.