Despite charming crypto investors and traders with its exceptional resilience against market volatility, Bitcoin’s value is now being called into question. And that’s not so surprising at this point after it dropped below $20,000—a low the crypto giant had left untouched since early 2021.
However, these developments are no cause for sweat yet, we think.
Bitcoin is dead. NOT!
But only as dead as Amazon was in 2000.
As dead as the internet was in 1997.
The Current State of BTC
A small bit of trivia, to start with: What’s special about 10 November 2021? It was the day BTC reached the all-time high of $68,789.63.*
That was the very day people started expecting it to touch $100K in no time. And rise it did.
However, the bears got the better of BTC and took the market down, bit by bit. Today, we’re sitting at $20,446, 70% down from the all-time high.
And it’s not just about the past few weeks. BTC has been correcting quite a bit over the past few months. It would be safe to say at this point that 2022 hasn’t quite been a breakout year for BTC or for crypto.
*We are sticking to the USD prices throughout this article for the sake of consistency.
Why You Should Not Be Worried Despite BTC Correcting
Let’s dial back to 2012. BTC closed the year at $13.45. Despite being cheap, it was up 185%, year-on-year. That’s the fun bit.
Here comes the harsh truth. Although BTC kept rising to $1,100 levels until November 2013 (there’s something about November, it seems), five months later, it was languishing at $365.
That’s an erosion of almost 70%. This is when we started hearing immediately people say, Bitcoin is Dead!
And the bears didn’t stop there.
BTC dropped all the way to $210 by early 2015. But it scaled beyond $15,000 in less than 48 months. That’s over 6,000% gains.
Source: Trading View
Something similar happened again a few years later. BTC dropped from the highs of $19,500, in December 2017, to $3,552, in January 2019. An 80% drop in 13 months.
Source: Trading View
In April 2021, when BTC was sitting pretty at $63,200, came another dip—eroding over 50% of the price in under three months. And as we all know, BTC quickly managed to gain over 100% in under four months.
Source: Trading View
What Can We Learn From the Price Moves?
The main takeaways of the history lesson above are as follows:
- BTC has a market dominance of almost 44.60% as of today. Which means its price moves more or less drive the broader crypto market.
- BTC dips are sharp and often mid- to long-term. Yet, the largest crypto by market cap tends to make a comeback (it’s not us but the charts talking here).
- With BTC, one may expect extended spells of sideways movements—although it may be a tad frustrating for a standard investor.
As for the recent market crash where BTC dropped under $25,000 and then under $20,000, it has little to do with Bitcoin itself and more to do with macroeconomic developments across the globe. Increased inflation, for instance, is a huge factor. It is slowly killing purchasing power. People all over are trying to generate liquidity by selling off their crypto. Besides, there is a strong correlation with equities, which is why the fed hikes impacted BTC.
As you can see, none of the issues are blockchain-specific. If it’s any consolation, Bitcoin continues to enjoy the highest possible hash rates (which means that the ecosystem is expanding), and leading institutional holders like Microstrategy are considering adding more to the reserves at such a discount. In addition, a recent study conducted by the Bank of America reveals that almost 90% of investors, including potential ones, intend to make additions over the next six months.
Now, if that doesn’t keep you HODLing, we don’t know what will.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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