Bitcoin bottom: how low will the price of BTC be, according to experts, and is it worth investing at the current price?

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Bitcoin and other cryptocurrencies are in free fall. But how low will their prices fall?

Bitcoin, which peaked at $68,000 per coin in November, fell by about 70% to fall below $21,000 on Monday. Ether, the second largest cryptoThe post-Bitcoin market value of the currency peaked around $4,800 before dropping to around $1,200. In general, cryptocurrencies and tokens have suffered.

Of course, cryptocurrencies are not alone. Stocks have been in a bear market this month, and the bond market is in a lot of fear. See also: Crypo Shiba Inu: Duncan Gray ranks #5 in “SHIB” top 10 influencers. But the cryptocurrency market is experiencing a particularly unexpected drop from last year, when the market value dropped from $965 billion to $2.6 trillion.

Cryptocurrency prices have always been based on what investors thought they were worth at the time. So why does it seem like investors are losing confidence?

“The reason there is so much downward pressure on cryptocurrency prices right now is because of the same forces that shaped the rise of the cryptocurrency and why people were so excited about it,” said Madeline Hume, senior analyst at Morningstar. “It’s really a unique asset. It helped crypto on the way up and hurt it on the way down. »

What happened to the cryptocurrency market?

In recent years, financial markets have benefited from government stimulus and near-zero interest rates, making it easier for businesses and consumers to borrow and spend money and try their luck with risky assets like cryptocurrencies. See article: This cryptocurrency provides a buying opportunity before its price reaches $70.. Those stimulus measures have disappeared, and the Federal Reserve recently raised interest rates by 0.75%, the biggest increase since 1994 and the third increase this year.

“We are seeing such an unwinding of all risky bets here, and crypto was the riskiest bet,” says Edward Moya, chief market analyst at multi-asset brokerage OANDA.

In addition, cryptocurrency exchanges often allow traders who wish to take a larger position in one cryptocurrency to back their purchases with other types of cryptocurrencies. But those who engage in this activity are called trade on margin risk automatic liquidation of their investment when the price of a coin, such as bitcoin, falls below the threshold necessary to provide this permanent guarantee. In other words, exchanges will force-sell their clients’ positions when the cryptocurrency market drops.

There is also just a lot of mistrust towards the cryptocurrency market as a whole. Earlier this year, the Luna cryptocurrency and its associated stablecoin Terra crashed, wiping out billions of dollars. Most recently, one of the largest cryptocurrency lenders, Celsius Network, suspended withdrawals, transactions, and transfers between accounts, citing extreme market conditions.

When cryptocurrency prices were already falling, the Celsius Network event really took many by surprise and accelerated the fall, according to Hume.

How low can the price of bitcoin fall?

The stock market has a community of opposite investors who are looking to buy when others are selling and get investments that seem undervalued. Think of Warren Buffett, famous for his opposite view on momentum trading. Read also: Bitcoin Bears Will Push BTC Price Even Lower! Traders can expect a deeper bear market ahead. (Momentum trading refers to the strategy of buying assets when they are in an uptrend and selling them at their peak, while value investing involves choosing assets that appear to be trading at a price below their intrinsic value.) The legendary investor advised investors to be afraid when others are greedy and be greedy when others are afraid.

But there is no comparable group of opposing investors in the crypto community, says Hume. There is a huge momentum in cryptocurrency trading right now and there isn’t a big community saying, “Hey, the fundamentals are here and now is a good time to buy,” says Hume. “Everyone is so worried about which domino will fall next.”

The real value of bitcoins may not be known. But while the cost of nearly $70,000 per coin was probably too high, $20,000 is probably too low, according to Chris Brandler, chief equity analyst at DA Davidson Companies, a capital markets firm.

He came to this conclusion based on research parameters such as the size of the bitcoin network, including the number of transactions and users.

“The levels of activity and the political, corporate and institutional landscape so supportive of bitcoin and more willing to at least listen today makes me think we are close to the bottom,” Brandler says. “But we never know.”

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Can the price of bitcoin drop to zero?

According to Hume, the price of bitcoin — the largest and most popular cryptocurrency — is unlikely to drop to $0 per coin. The reason for this is that use cases have been established, especially for the aforementioned security controls. She also adds that bitcoin has, for better or worse, become the crypto gateway to much of traditional finance. For example, El Salvador became the first country to adopt bitcoin as its national currency in 2021, and Fidelity Investments recently announced that the company is allowing bitcoin to be used in 401(k) plans.

However, it is possible that investment in bitcoin and other cryptocurrencies could drop to zero even if the price of these assets remains positive, says Hume. How ? There may be instances of creditors defaulting without adequate collateral for their investors and without sufficient collateral.

More recently, Harmony, which allows people to exchange coins between different blockchains, tweeted last week that $100 million was stolen by hackers.

Is this an opportunity to buy bitcoin?

When markets crash, you can buy at a lower price.

Bitcoin is at a level where it is starting to look attractive, Moya says. He believes that for some time we will most likely see bitcoin trading near a key level, such as $20,000 per coin. For Ether, this level could be $1,000.

“There is still so much potential and opportunity in the world of crypto that you won’t see a complete abandonment of this space despite these painful losses,” says Moya.

But if you want to take advantage of this low price, you have to be careful. Cryptocurrencies do not have a fundamental value and depend on investor sentiment, which is very difficult to foresee and predict. Financial advisors recommend not investing in risky assets like cryptocurrencies unless you are prepared to lose. Some advise not to allocate more than 2-5% of your portfolio to these digital assets.

For those looking to invest, take a stepwise approach, Moya suggests. This could mean investing a small amount when the price of a bitcoin is $20,000 per coin, a little more at $19,000, and more at $18,000.

But what if you can’t accept a 50% drop? Stay away from cryptocurrencies.

Thomas Estimbre
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