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In 2022, the leading cryptocurrency continues to fall faster than traditional assets due to poor economic conditions.
After reaching an all-time high of US$67,566.83 on November 8, 2021, the biggest cryptocurrency by market capitalization lost pace. The price fell below $50,000 in less than a month, kicking off the crypto winter. Bitcoin (CRYPTO:BTC) is down 54% year to date as of this writing.
Bitcoin is having a difficult year. To say that was disastrous would be an understatement. While financial markets are similarly volatile, the instability in the cryptocurrency sector as a whole is far worse. Bitcoin and other cryptocurrencies are plummeting at a quicker rate.
Extreme turbulence
Because of the current economic situation, demand for and faith in Bitcoin has declined dramatically this year. With galloping inflation, increasing interest rates, and the possibility of a recession, investors will avoid riskier investments. The volatility of cryptocurrency is so high that you might lose money in an instant.
Some observers believe that the value of Bitcoin is determined by its attractiveness. If the value continues to fall, expect the selloff to last longer. It may even be an endless loop. Furthermore, according to FT markets editor Katie Martin, "Bitcoin has no inherent worth to back it up, and there are no bricks and mortar, income streams, or underlying businesses."
"The price is simply and completely whatever people are willing to buy it from you for," Ms. Martin remarked. That's when it becomes frightening for people, since if enough people rush for the escape, there will be no floor. Nothing prevents it from trading at $10,000 tomorrow if enough individuals give up or are forced to sell."
Should I buy or sell?
Bitcoin enthusiasts would claim that now is a good moment to purchase the digital asset since it is inexpensive. Their counsel is to be patient, as it will ultimately turn the corner, as it has in the past. However, Altaf Kassam, managing director of State Street Advisors, advises investors to proceed with extreme care. "Honestly, it's somewhere only the courageous should enter," he remarked.
Bitcoin fell by 85 percent and 84 percent in 2013, respectively. Following last week's performance, US$20,000 remains the critical level. However, crypto specialists believe that the drop from those years will occur again in 2022. As a result, a dip below the psychological threshold is not improbable.
Absolute Strategy Research's co-founder and chief investment officer, Ian Harnett, believes Bitcoin might fall below US$13,000, a 40% drop from its present price. "We would still be selling these kind of coins into this atmosphere," he added.
Positive attitude
According to Alex Kuptsikevich, senior analyst at FxPro, comparing drops between 2013 and 2017 in today's climate is misleading. "In our opinion, it is far more reliable to anticipate that Bitcoin will find a long-term bottom near the highs of the last four-year cycle," he added.
"It may not be the greatest moment to purchase," Kuptsikevich noted, "since it may take substantial time until the crypto market digests the recent upheaval and enters a new period of sustained demand from broad categories of investors, not only stressed asset seekers."
JPMorgan remains optimistic on Bitcoin and forecasts an increase. While the decline is more severe in 2022, the American investment bank stated that the bitcoin sector has more potential to rebound. To stay involved in cryptocurrencies, you must be a courageous investor.
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