BTC Vs. Bear
2022 was a real roller coaster for Bitcoin and other altcoins following its trends. Even the very beginning of the year saw some serious drops and fluctuations. The first half of the year seemed promising, however, the crypto industry has been going downward ever since. The most horrible moment for BTC crypto holders might have arrived on June 13, 2022, when the bear market officially started.
For those who aren’t familiar, a bear market refers to a drop higher than 20% of the peak value of the index. And this is not something unusual. Stock market downturns, a.k.a bear markets take place periodically, and the reasons always vary. On some occasions, changes can be associated with extreme market valuations following an extended bull market. On others, they can be the outcome of external events that overwhelm basic factors which typically affect stock market performance.
The harshest decline might have happened during the Great Recession that occurred in the period 2007-2009 when stocks dropped by more than 50%. The next bear market occurred in 2020, triggered by the COVID-19 pandemic. However, this one was short-lived, so stock markets managed to recover soon. The 2022 bear market can be linked to the increasing level of uncertainty for investors, stemming from three key events – high inflation, a substantial change in the Fed Reserve monetary policy, and the economic aftermath of the Russian invasion of Ukraine.
The Bumpy Year
BTC entered 2022 at about $46,000. The first more serious drop occurred on January 23 when BTC amounted to $35,000. The dip was only temporary and BTC started rising, reaching over $44,000 on February 9. Following bouts of oscillations, BTC hit $47,000 on March 27. Falling again to approximately $39,500, BTC continued to revolve around $40,000. On May 9, it dipped to $34,000, and on May 13, it fell all the way down to somewhat less than $29,000.
June 13 was the day when BTC started going down the rabbit hole. At the time, it dipped to about $26,000 and only continued to decline over time. Six days later, it dropped close to $19,000, but recovered fast and oscillated around $20,000. Another serious decline took place on September 7 with BTC hitting about $18,700. Since then, it barely managed to rise, save November 7 when it almost reached $21,000.
The moment investors must have suffered anxiety attacks arrived on November 10, 2022, when BTC plunged to somewhat more than $15,500. One can’t help but associate the collapse of the FTX crypto exchange with it. Nevertheless, it was certainly the day when people started predicting the death of BTC, together with other cryptocurrencies. From then on, it stayed around $16,000 until January 9 when it exceeded $17,000. It continued to rise, hitting $19,000 at the time of writing.
BTC trends in 2022, source: CoinMarketCap
What’s Behind BTC Rise?
It can’t be denied that everyone is bewildered by the sudden increase in Bitcoin value, wondering what could be behind it. No one is certain if the rise is only temporary and how sustainable it may be. Onur Sener, crypto analyst and trader and former researcher at CEX.IO, a cryptocurrency platform from the U.K. shares his view on current trends.
- Expectations about U.S. inflation (U.S. CPI) dropping further in 2023
- Due to the expected CPI drop, markets expect the Fed to end interest rate hikes in 2023
- Lower inflation and lower interest rates typically favor technology assets and hence the increase in the price of Bitcoin
- The drop in the U.S. dollar index
- The drop in U.S. bond yields
Commenting about the sustainability of the current price increase, Sener says: “18,500/18,600 is resistance now. Today, (January 12) there is a 2022 CPI (Consumer Price Index) announcement in the U.S. If BTC blows past $18,500 following the announcement, there is major descending line resistance at $19,000. At least a temporary pullback at that level would be quite likely. Then we have to look and see after that correction, to see if BTC has left more juice to climb past $20K.
Shorter term horizontal resistance at $18,400
At the end of the day, everything depends on the US stock markets. If S&P 500 cannot climb past $4,100 and starts to crash from there, I don’t think BTC can go beyond $19-20,000.”
Descending line resistance and the horizontal resistance at $19,600
Another possible reason for the BTC price rally could be related to the announcement of Andy Dietderich, the FTX attorney, from January 11. Dietderich disclosed that FTX $5 billion in cash and liquid cryptocurrencies had been regained. This might undoubtedly be fueling hopes of returning at least a portion of customers’ funds in the future.
Is the Crypto Winter Thawing?
On Monday, January 16, Bitcoin broke above $21k for the very first time since November when it plunged to horrendous $15k. such a price rally indicates that crypto investors and holders are pricing in more favorable market conditions this year with inflation appearing to have reached its peak.
Even though BTC is rising, and the general crypto market is witnessing positive trends, it by no means implies that the bear market and crypto market are to end soon. Bitcoin value might drop all of a sudden, or it may continue rising. Price predictions for the year 2023 vary to extremes. There are investors who forecast that BTC may reach a whopping $250,000 by the end of 2023. Others are way more pessimistic, arguing that the worst is yet to come. According to their predictions, Bitcoin may plunge as low as $5,000. If you’re considering investing in Bitcoin, it’s critical that you do your due diligence and research the market thoroughly. If you’re a beginner, you may want to seek advice from a more experienced trader. What is advisable is to try to avoid falling prey to FOMO (Fear of Missing Out) and keep your mind clear. Also, try to follow the investment rule: always invest the amount of money you can afford to lose.