Bitcoin Crash in Focus- More Pain or A Recovery in the Offing?

Even by Bitcoin’s standards, the last 10 weeks have been pretty rough.

15:22 25 January 2022

Fresh from posting an all-time high of US $69,000 in November 2021, Bitcoin hit a rough patch. Can the digital currency find a way to arrest its slide? Or, is it in for more trouble in the weeks to come? Let’s take a look.

 

Even by Bitcoin’s standards, the last 10 weeks have been pretty rough.

 

The digital currency has been on a steady decline, losing around 50% of its value in an unusually wild and crazy sell-off. There were minor retracements along the way, but the larger trend seems to be clearly downward with the price continuing to make newer and newer lows.

 

At the time of the market closing on 24th Jan, the volatile currency was changing hands well below $35000, down approximately 4.22% in the last 24 hours. The bitcoin price is down about 19% in the past week alone, and this plunge in price is right on track to surpassing Bitcoin’s worst ever weekly performance in May 2021 which came on the back of the Chinese regulators tightening their grip on crypto trading and mining and Elon Musk putting out a series of pro-bono tweets on the ill-effects the fast-expanding blockchain network has on our environment.

 

The Crash Took Everyone Off Guard

After its mad dash to new heights, Bitcoin needed a breather to regain a bit of lost momentum and head towards the much talked about $100k. At least a good majority of market participants and investors thought so.

 

But a serious crash ensued, taking everyone off guard.

 

Well, a crash of this magnitude is not uncommon in the world of crypto, but this one came out of nowhere sending the crypto market reeling. Investors and traders are scratching their heads over its timing (right after an all-time high) and how far it has actually lasted. Even the most bullish crypto advocates (or hodl-ers as they’re known as) are shaken by the carnage they’ve been witness to, and are seriously contemplating how long they can hold on for and whether they should.

 

Underlying Reason for Breakdown

The Chinese authorities' proposal to beef up their regulations surrounding crypto was the headwind last time. But it is the US Federal Reserve’s policy meeting this time around. It is believed to be a key factor behind all the drama unfolding in the equity and crypto markets. Traders seem to be pricing in fears that there’ll be some changes in the quantitative easing policy currently in force and a likely rise in interest rates as well. They’re right in thinking so. Remember that it was Fed’s pandemic stimulus which gave Bitcoin and other cryptocurrencies a shot in the arm and unleashed them on a historic bull run which spanned over a good year and half but sadly appears to have culminated with the November top—at least from a short-term perspective. With the broader market anxiously waiting to see how the Fed policy meeting is going to pan out later this week, an extended selling spree cannot be ruled out this week.

 

‘Buy the Dip.’.... Not Looking Attractive Now

The weak hands liquidating their long positions marked the commencement of a shakeout, a common occurrence in a market where volatility swings back and forth viciously such as crypto.

 

This shakeout, however, presented a legitimate ‘buy the dip’ opportunity to traders and investors waiting patiently for the price to come down from the highs of US$69k.

 

But when it corrected to US$50k Bitcoin couldn’t find enough buying interest and slipped sharply to US$40k in a two-day slide triggering a massive sell-off.

 

The expectation was that the dip would be a fresh opportunity to go long, but apparently the market had other ideas. Each dip was sold into and that put more pressure on Bitcoin and brought the price further down to lower and lower levels. And the ‘buy the dip’ campaign has lost support, a clear sign that the market participants reckon it’s time to adopt a wait-and-see approach -- which is actually a sane thing to do considering the amount of wealth erosion that happened during this extended spell of panic selling.

 

The price is now teetering along at a key demand level, in the lower side of $30k, which many think would be good enough to offer the solid base Bitcoin needs to steady its course and position itself for the next leg up.

 

As was mentioned earlier, a large number of traders and investors saw the minor pullback as a genuine chance to buy bitcoin at a fairly good price and that included the premier of the bitcoin-friendly nation El Salvador. The president Mr. Nayib Bukele confirmed in a tweet that the recent dip has allowed him to add 410 Bitcoins to the country’s tally. He stated he was surprised at how people are willing to part with their bitcoins for such a low price. If you’re also bullish about bitcoin over the long term and want to cash in on the opportunity now, go ahead and open an account with the highly intelligent crypto trading bot, primarily developed to give traders their edge in the market. A lot of people have been able to ride the crypto wave with no prior knowledge or experience trading in the markets. Don’t let your inexperience stop you from joining the crypto bandwagon. Hop on and head over to the website to find your edge with a powerful crypto bot.

 

Recovery or More Pain?

Bitcoin seems to have a rock-solid support in the price band between US $30k and $33k, and there’s a good chance Bitcoin might quickly snap out of its losing streak and get a little choppy and range bound if it were to enter this region. That said, there’s still a lot of fear and panic in the market. The situation won’t improve unless a clearer view emerges from the Fed reserve meeting, so it is hard for one to say that Bitcoin has bottomed out for the short term. And that’s about the downside. As for the upside, although it seems there is no relief in sight, the much-needed turnaround should come when the bitcoin bulls muster up courage to enter the market looking for profits.