Bitcoin Still in Troubled Waters; But There are Still Reasons to be Bullish

The crypto rout is heading into its 9th week, and certain digital tokens are under enormous selling pressure.

14:20 31 January 2022

The crypto rout is heading into its 9th week, and certain digital tokens are under enormous selling pressure. But the gloomy outlook has not affected the spirit of some crypto faithful one bit. They think the bottom is in and are searching for some buying opportunities. Here's why we think they may be right.

 

Crypto critics are coming out of the woodworks gleefully as the digital tokens struggle with arresting the ongoing slide. Why wouldn't they?

 

Bitcoin and the crypto pack are going through an unprecedented slump. They were nowhere to be seen last year when Bitcoin overcame all hurdles to top out at $69000. But the tide started to turn and suddenly it found itself on a rapid decline. And it has been one-way traffic since then.

 

Since the downturn began, Bitcoin has managed to be able to finish in the green just 30 times in nearly 3 months. Worse yet, it barely scraped along to close higher than its open price just 9 times in January.

 

As of writing, Bitcoin is on the doldrums moving between $36000 and $38000, and at times flirting dangerously with the key support level at $33000. No clear sign of recovery is evident, and nobody can tell where the market is headed next.

 

Whether the ongoing bearish trend will intensify into a deep correction that the price will keep finding new lows to sink to? Or will the bulls turn up in droves in the nick of time and whisk the market into safety?

 

Crypto faithful are not giving up yet. They’re still looking at the positive side and they have their own reasons for not buying into the gloomy forecast being peddled by critics.

 

In this article, we will go over a few key reasons why they strongly believe bitcoin will stage a comeback and surge upwards to post higher highs.

 

Bitcoin Nosedived But it has Seen Worse

Maybe the continuous selloff has left you panicking and you're mulling dumping your holdings to trim your losses. We suggest you think long and hard about it before liquidating your positions.

 

Four to five retracements in a year is not unheard of in the world of Bitcoin, so deliberate carefully before taking a call. One good look at the historical BTC/USD chart and you’ll realize that huge retracements are not new in the wild world of crypto. Retracements where the price typically drops by 30% to 50% are not uncommon in this space.

 

Over the past five years, there have been a couple of instances where the price tanked, the first of which came in late 2017 when Bitcoin lost about 84% before the bears decided to throw in the towel, and the other one followed several months later in June 2018 in which Bitcoin ended up shedding roughly 70% of its value. 

 

Bitcoin, however, pulled itself out of the deep rut on both the occasions and bounced back with a bang, so there's absolutely no reason why it cannot now. 

 

Its price corrected 56% in April 2021 and has lost just about the same amount this time around as well. These retracements, although huge, pale in comparison to the ones mentioned above.

 

Moreover, a 80% drop from the latest high at $69000 means Bitcoin's current fall will turn into a deeper correction that could drag until the price has descended down to around $12000 to $14000.

 

It’s highly unlikely given Bitcoin is currently tapering but holding up well otherwise.

 

There’s no sign of weakness that can take the price down below $33k or even lower. And that's a rare silver lining of a troubled time.

 

No Long-Term Structural Damage Seen

Bitcoin is now starting to show signs of recovery, having suffered a drawn-out sell off which is fast approaching the 90-day mark. 

 

Although this drawdown has sent the price into a bit of a cliff dive, the price structure of Bitcoin is still largely intact with no hint of any significant long-term damage.

 

One obvious commonality that stands out between the current crash and the one back in April 2021 is that Bitcoin’s price came down by a similar amount. Another interesting observation between these successive price slumps is that the angle of descent in the current selloff is also dangerously similar to what we saw in April 2021.

 

And if history was to repeat itself, then we could be in for another big rally where price can push past the $70k region comfortably.

 

Bitcoin Stood Firm Despite Negative News

The outcome of the US Fed Reserve policy meeting last week turned out to be negative as expected. The Fed's decision to hike interest rates dealt a severe blow to all major global markets including crypto and served as a reminder of its aggressive, hawkish stance on monetary tightening.

 

Everyone predicted that the US Fed Reserve decision would prove to be a final nail in the coffin and that any unfavorable change in policy could send the market tumbling. In fact, the news did have a definite impact on the global markets with a lot of them falling sharply and cryptocurrencies were not immune either. But Bitcoin managed to keep its head well above water, resisting another brutal selloff which could have potentially dragged the price under the $30k mark stoking another bout of panic selling.

 

The reasons mentioned above reinforce our positive bias with respect to Bitcoin's recovery.

 

Sure, the crypto pack has been dealt a blow, and bitcoin in particular is still not acting well. It is trying its best to recover from what has been three months of extreme distress, but it's far from finished.

 

It's here to stay. And it's just a matter of time before it gets back on its feet.

 

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