In June 2022, crypto investors experienced an unprecedented nightmare – the cryptocurrency rate practically crashed. For the first time since the record price of $69,000 in November last year, the cryptocurrency has fallen in price and has become worth only $25,000. And it's still falling.
We recently told you about all the misadventures of the primary cryptocurrency of the market. You can read the blog about it here.
The next significant drop occurred at the end of August this year – immediately after the speech of Jerome Powell, an American lawyer and a member of the Board of Governors of the Federal Reserve System. The top cryptocurrency fell about 6% on August 26, after he came with a speech at Jackson Hole and signaled higher interest rates to fight inflation. Powell stressed that the Federal Reserve wants to subdue financial markets to make it a part of an effort to curb economic activity and contain price pressure.
Experts said it was the hint for the cryptocurrency price bottom. Also, there was a threat of a more significant drop and collapse in stocks.
At the time of writing, the value of Bitcoin is approximately $19,230.
Should we expect this to be the bottom for the price of the leading cryptocurrency, or are these unrealizable forecasts from skeptics advancing to the masses? Let's think about it deeper.
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Is this the first such fall of the principal cryptocurrency of the market?
Of course not. We have already seen several record drops in cryptocurrency: the drop from the unimaginable $20,000 in 2017 to $3,000, the crypto winter in 2014-2015.
One of the main rules of the market is that everything is cyclical. This is not only a rule of the market but also a rule of history in general. At some point, history repeats itself, so it is essential to remember the main stages and moments to understand what is happening and what will happen to this or that event. So it is in the market. Bitcoin has already fallen several times, but it has always risen.
To understand why Bitcoin fell, you need to look at the phases of the movement of this cryptocurrency between 2013-2017. In 2013, the maximum drawdown of Bitcoin was 85% and took 407 days. Next, in 2017 the Bitcoin rate fell by 84% in 364 days. Arcane Research analysts calculated that the current drawdown lasted 229 days with a maximum drop of 73%.
In their report, there is such a prognosis, based on the plan of the cycles we mentioned above:
If the rate follows the plan of these cycles, it will bottom somewhere at the end of the fourth quarter of 2022 and will be around $10,000, although there is always the possibility of a pullback of 85%. Bitcoin is now much more intertwined with the broader financial markets, with federal agencies, US elections, and the stock market impacting its performance.
Also, there is research made by the Delphi Digital company, where the experts also present their forecast related to the leading cryptocurrency. Their prognosis is not quite consolatory because they predict the possibility of a further collapse.
In case of long-term changes in the market structure, Bitcoin could soon reach $9,500-$13,500, but only if the drawdown from peak to a minimum will be 85%.
The current drop is relatively small compared to what we all have already survived during all of the drawdowns of Bitcoin's price. Surprisingly, even after such mighty falls as today, many still believe Bitcoin copes well enough with volatility and holds its position perfectly ideologically. This is extremely interesting, given the whole background.
Some attentive market players monitor the price level of Bitcoin to understand the mood of all investors and traders concerning cryptocurrency. The level of $20,000 shows that the sentiment is quite vulnerable, but it is too early to talk about massive damage.
Interestingly, the price of Bitcoin, on average daily, moves slower and at lower levels than in June, for example. So, this month's fall was 2.4%, and the increase was 1.4%, compared with peaks of 4.1% and 3.4%, respectively, in June.
Bitcoin hits bottom, they say. Why?
Many people think that the bottom price of BTC is close. There was a curious article from Cointelegraph, where the authors gathered three main reasons investors' and traders' moods are not comforting.
- The rising wedge of BTC price breaks down.
The fall in the value of Bitcoin in recent times has led to the formation of a rising wedge. This can lead to considerable losses for the cryptocurrency shortly. Rising wedges are bearish reversal patterns that form after the price rises inside an ascending contracting channel. However, they disappear immediately after the price breaks down. This can and most often leads to the fall to the maximum height of the wedge.
BTC/USD daily price chart featuring "rising wedge" breakdown setup. TradingView
The Bitcoin chart above shows a rising wedge breakout target at $17,600. So, the cryptocurrency price can fall by 25% by September.
- Bitcoin bulls underestimate the Federal Reserve System.
During the formation of the rising wedge, Bitcoin rose by 45% after the low level of the last time – $17,500. This period coincided with expectations that inflation was at its peak and that the Federal Reserve would cut interest rates in plus or minus six months. This was made possible thanks to the chairman of the Fed, Jerome Powell, already mentioned by us earlier.
On July 27, Powell said:
"As monetary policy tightens further, it may be prudent to slow growth while we assess how our cumulative policy adjustments affect the economy and inflation."
The chart below, taken from the Fed, indicates that most officials are waiting for an interest rate of 3.75% by the end of next year. Then, they expect a decline to 3.4% in 2024. This means that the rate cut is speculative. Bitcoin and other volatile assets in a bear market territory (with an aggressive tightening cycle from the Fed) will be under pressure for several more years.
Implied Fed funds target rate. Federal Reserve
- If everything was so simple and obvious
A recovery in the price of Bitcoin could be a false bullish signal when looking at the past background when the asset rebounded in previous bear markets.
So, during the 2018 bear market cycle, the price of Bitcoin recovered 100% (from $6,000 to $11,500) but immediately collapsed and fell to $3,200. There were similar rebounds and retracements in 2019 and 2022.
However, some people believe in the positive perspectives of this event. Especially when they see the confirmations and indicators that warn against hasty judgments. Thus, seasonal trends show that September is a tough month for traders, and they pay more for options to be protected against drops below the level of $18,000.
Will the Bitcoin price recover?
The Bloomberg analyst Mike McGlone shared the thought that the price of Bitcoin can recover during the close months because he saw the repeatings with 2018 – then the crypto market bottomed out and rebounded strongly in the first half of 2019. McGlone believes that the price of Bitcoin can be recovered.
In June, the analyst of Capital.com, Aleksey Yakovlevich, predicted that during the next bullish cycle, BTC could rise in price to $125,000. He also says that he doesn't know when it will happen, but the approximate period is from 1 to 4 years.
Another expert, Chen Limin, CFO and Head of Trading Operations at ICB Fund, agrees with Aleksey and thinks BTC is the most promising cryptocurrency on the market nowadays. At the same time, he believes that the correction may be delayed, so he recommends that investors not take excessive risks. The best position is neutral here, they say.
According to Cointelegraph, the bearish phase of the market is happening now because of several world events:
- monetary policy tightening in the United States for inflation reduction;
- the war between Russia and Ukraine;
- crypto market global regulation;
- world rate of unemployment;
- the failure of the seemingly reliable crypto projects: Terra, Celcius, 3 Arrow Capital.
These are precarious times, so believing any forecasts accurately is a dubious occupation. If we talk about predictions, experts say that now you can only trust algorithmic systems that can, plus or minus, predict some things at the level of mathematical and other calculations.
CoinCodex's predictions on September 2, for the short-term Bitcoin rate, were bearish because 19 technical indicators were bearish and 13 – were bullish. The service recommended not buying Bitcoin during this period. At the same time, the BTC price could be increased by 2.26% to $20,539 by the end of this week.
The following example is the forecast from the Wallet Investor algorithmic service. It was encouraging enough because the average price of BTC may recover to $27,121 by the end of December, but by the end of 2023, the average cost of it could reach $40,218! As the Wallet Investor algorithmic service claims, the next record will be in 2027: the new Bitcoin high will be $83,348.
To sum up
To sum up, every investor and trader should remember that the cryptocurrency market is still almost the most volatile, and investing in coins carries significant risks. This, among other things, makes any predictions even more difficult. We recently reviewed projections that were created specifically for Bitcoin. You can look at this blog and compare what has come true and what has not. A range of a few days, a few weeks, or a few months – of these is difficult to match with the exact cryptocurrency forecasts. That is why many predictions from analysts or forecasting services do not come true or turn out to be erroneous. And that's okay – that's life.
If you plan to invest in the cryptocurrency market, we strongly recommend you do research by yourself. No matter what they say, what forecasts predict, or what your friends or analysts from the platforms claim, you are responsible for your life choices.
Also, be aware that history, although cyclical, can bring surprises: past results may not coincide with the current situation, and they cannot 100% guarantee excellent income results.
Remember the golden rule: do not invest more than 5% of your available income in volatile and risky assets. And you will be happy! And read Wisebitcoin. We have a lot of fabulous blogs.
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