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Wednesday, November 30, 2022

Can Bitcoin Drop Lower? • Price Analysis • Benzinga Crypto

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As the face of crypto, it may be worrying to see Bitcoin significantly down since its November 2021 high. The price movement of Bitcoin has many investors concerned about a potential end for crypto or if a long bear market is taking over. Taking a step back and looking at the factors that affect BTC’s price, however, sheds light on larger trends that not only affect Bitcoin but the entire crypto market and other markets as well. 

It’s important to note other markets are interrelated with crypto. As such, movements in assets like Bitcoin often parallel movements in other markets. The connection is evident when looking at stock market performance, especially tech stocks that were hard hit earlier this year. Amid uncertainty about the Fed’s interest rate increase, tech stocks faced a notable sell off that was mirrored across numerous digital assets (especially Bitcoin), demonstrating the interconnected nature of these markets. 

Though many cite the Fed’s interest rate hike as the main reason for tumbling stock and crypto prices, there’s more to unpack here, especially beyond the short term. Understanding these underlying trends can help investors refine their outlook and investment strategies related to Bitcoin. 

Can Bitcoin Drop Lower Than $30,000?

The last time Bitcoin dropped below the $30,000 mark was July 2021 following news of China’s crackdowns on crypto mining and trading. This dramatic drop in price was best explained given China’s influential standing in the crypto mining industry, and the current price action of Bitcoin can be explained by similar events.

When considering if Bitcoin will dip beneath this price again, it’s important to look at the factors working against its growth. Some of the biggest short-term pressures include regulatory pressures from foreign governments and market policies from the Fed in the U.S., both of which could drag the price of BTC down. 

Switching to a long-term view reveals another factor that could work against Bitcoin: halving events. A Bitcoin halving event is when the reward for validating transactions through mining is cut in half. This procedure in turn increases the value of Bitcoin yet to be mined and further contributes to the value of the coin. 

Halving events are important as the price movements of Bitcoin are cyclically related to when these events take place. For example, the last halving event took place in 2020 after which investors expected an 18 to 24 month bull market. Price hikes did take place, with Bitcoin reaching an all-time high in that time period, but as an 18- to 24-month window comes to a close, some investors expect a sustained bear market to follow. Apart from the more immediate events mentioned above, halving events could explain the longer-term price action of Bitcoin. 

Why Is Bitcoin Going Down?

One of the biggest reasons the price of Bitcoin, other cryptos and other markets are going down is the dreaded Fed interest rate hike. Investors are nervous that the Fed’s decision to increase interest rates will lower asset prices and prompt a sell off of inflation-hedging assets like Bitcoin. Though an increase in interest rates may be worrisome, it’s beneficial to look at this from a historical perspective. 

Though interest rates are set to increase starting in March, individuals should take note that these increases are not far off historical lows. Why is Bitcoin reacting with so much volatility then? Well, one reason to explain this is the outperformance of crypto and tech stocks this past year. In a slowly transitioning post-pandemic era that is normalizing the markets, big tech stocks and crypto are seeing a leveling off from their surges, potentially causing fear among investors. In the long term, however, this leveling off can be considered a temporary adjustment in these markets. 

Another factor influencing the downward price movement of Bitcoin is Russia’s central bank taking a stern stance on crypto. Similar to the events surrounding China in 2021, Russia’s central bank proposed a ban on crypto trading and mining and described crypto as a pyramid scheme that seeks to undermine the sovereignty of monetary policy. 

Harsh, right? Nonetheless, the importance of this statement stems from Russia’s standing as the third largest country to contribute to Bitcoin mining, behind Kazakhstan and the United States. Though no changes have been set in stone, the views expressed by Russia’s central bank could be a contributing factor to Bitcoin’s downward price. 

How to Short Bitcoin

Investors should know that trading derivatives is a very risky proposition, but when it comes to shorting Bitcoin, the process itself isn’t too difficult. Take a look at the following steps to learn how to start shorting Bitcoin.

  1. Open an online account.

    First, open an account with a reputable exchange with access to derivatives trading. Two excellent exchanges to choose from are Bybit and FTX as each offers state-of-the-art security and curated tools for traders looking to short BTC. Both Bybit and FTX are world-class exchanges and are great places to start shorting Bitcoin; however, neither of these exchanges are available to U.S. citizens.

  2. Fund your account.

    After setting up your account, the next step is to fund it. You can use a couple ways of doing this that include direct bank transfers and transferring Bitcoin from another exchange or wallet. After finding the funding method that best suits your needs, you are ready to move on to the next step. 

  3. Choose your leverage.

    Now it’s time to choose your leverage. Leverage describes the ratio of your collateral to your borrowed funds, and it can be thought of as a multiplier on your investment. FTX hosts a number of leveraged tokens to choose from. 

    When deciding leverage, it’s good to weigh the risks involved. Higher leverage increases your potential upside but also multiplies your losses if your bet doesn’t pan out the way you intended. After deciding on a level of risk that best aligns with your investing goals, you are ready to enter into a short position. 

  4. Enter your short position.

    All that’s left to do is enter your short position. Since you’re betting that the price will go down, you will have to set up your stop-loss order and target price accordingly. You also need to determine the amount of collateral (usually in Bitcoin or USD) that you are willing to put up. 

    With your short position entered, you’re all set up to accept the transaction. Go ahead and click the sell button. Congrats on successfully shorting Bitcoin!

Can Bitcoin Still Hit $68,000 in 2022?

A level of $68,000 was Bitcoin’s all-time high in 2021 and is a good comparative price when considering Bitcoin’s potential for the coming year. Before answering this question, let’s take a brief look at how Bitcoin has performed against other important indices. 

Bitcoin outperformed the S&P 500, gold and the Nasdaq over the past year with an ROI of 20.30%. In fact, if an investor had bought Bitcoin two years ago and held it today, they would still have outperformed the S&P 500 over the entire last decade. This wider perspective helps put any shorter-term price movements of the asset into picture, but what about the coming year?

One factor working for Bitcoin’s growth is inflation. If the Fed’s planned interest rate hikes don’t manage to keep inflation below its 2% target, more people are likely to pick up Bitcoin as a hedge against rising inflation. The idea behind this is that by putting money into assets that are almost certain to rise in value at a rate greater than inflation, investors are able to effectively hedge against any losses that inflation may bring. 

Other factors that could help Bitcoin rally include continued increases in non-zero Bitcoin wallets, which describes the number of new wallets that have a balance of Bitcoin greater than zero. Additionally, if more companies adopt Bitcoin as part of their treasuries or payment systems this can further its adoption as a store of value and can give Bitcoin the hallmarks of a proper currency. 

Where to Buy Bitcoin

Since Bitcoin is the largest and most popular cryptocurrency, almost all cryptocurrency exchanges will allow you to trade it. Even brokerages like Robinhood Markets Inc. (NASDAQ: HOOD) and Webull offer access to Bitcoin. 

Some of the most popular trading platforms are Coinbase Global Inc. (NASDAQ: COIN), Crypto.com, Gemini and Voyager. Each of these exchanges feature robust security and easy-to-use interfaces that makes trading Bitcoin a seamless experience. 

1 Minute Review

Crypto.com strives to make cryptocurrency a part of everyday life by offering a full suite of services for crypto users. The company offers a Crypto.com App, Exchange, Visa Card, DeFi swap, DeFi Wallet, DeFi Earn, Crypto.com Price, staking, crypto lending, and many other services. What really sets them apart, however, is the combination of super low fees and incredibly generous rewards programs for their users.

Best For

  • Traders who want access to a secure, low-cost cryptocurrency exchange
  • Passive investors who want to earn interest on their balance without frequent trading
  • Mobile investors who prefer to handle all their crypto needs via their phone or tablet
Pros

  • Low fees
  • High security
  • One-stop shop for all your crypto needs (wallet, trading, spending, and more)
  • Lots of ways to earn interest, rewards, and rebates
Cons

  • Low privacy
  • Customer service response time could be improved

1 Minute Review

Gemini is a cryptocurrency exchange and custodian that offers investors access to over 100 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. 

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best For

  • New investors looking for a simple mobile and web app
  • Day traders looking to use technical analysis tools
  • Users looking for a 1-stop-shop to buy, sell and store all of their cryptos
Pros

  • Easy and quick signups — can get started in as little as a 5 minutes
  • Multitude of platforms to accommodate traders of all skill levels
  • Hot wallets include insurance to protect your from theft and hacking attempts
Cons

  • Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app


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1 Minute Review

Voyager is a leading name in the sphere of cryptocurrency investing, giving you access to over 50 tokens and coins. Buy, sell and swap assets using Voyager Crypto’s simple mobile platform available as a free download for iOS and Android users. 

When you invest through Voyager, you’ll pay nothing in commissions, which is a major benefit when compared to other cryptocurrency brokers. Voyager is also one of the only brokers we’ve seen that allows users to earn interest on their crypto investments. 

Though the broker could do more to improve its customer service, it’s an excellent option for beginner investors and seasoned professionals alike.

Best For

  • Cryptocurrency investors looking for a wide selection of supported projects.
  • Investors who prefer mobile trading.
  • Anyone interested in earning interest on their crypto investments.
Pros

  • Simple, straightforward and intuitive mobile platform
  • Wealth of investment opportunities
  • Allows users to earn interest on select crypto investments
Cons

  • Only available for mobile users — no desktop platform
  • Limited routes to contact customer service team

Will Bitcoin Keep Crashing?

If fears of the Fed’s interest rate hike and governmental controls from foreign countries are powerful enough, then investors could expect continued downward price movements for Bitcoin. This potential trend is dismissive, however, of many other factors at play including elements at the macro scale that hold significant roles in Bitcoin’s price action. It is important for investors to weigh short-term events with long-term outlooks when making the decision to invest in Bitcoin. 

Is Now a Good Time to Buy Bitcoin?

Though people may tell you to buy the dip, is it actually a good time to invest in Bitcoin? It really depends on how you view the asset and where you believe it’s headed. 

If you believe in the long-term applications of Bitcoin and consider its track record since its inception, then buying and holding Bitcoin would be appropriate. A good way to minimize the risk you take on is to dollar cost average into Bitcoin whereby you invest a set amount of money on a recurring schedule to reduce the impact of volatility on your overall investment. 

Regardless of whether you are buying, selling or holding BTC, it’s critical to look beyond the short-term price action of Bitcoin and think in terms of years. As cryptocurrencies become more widespread, traders are looking at the potential for Bitcoin to explode further in use cases and popularity while being wary of Bitcoin’s volatility and susceptibility to external events.

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