Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bitcoin has had a rough start to the year. As per CoinMarketCap, its price has fallen more than 35% from its November high. On Jan. 10, the price fell below $40,000, its lowest level since September. Since then, it has gained some ground but is still trying to pull ahead.
Many crypto investors are wondering if the price is close to the bottom, and if so, whether the king of cryptocurrencies is about to take off. To answer this question, we need to look at the causes of bitcoin's decline and the factors that could lead to a new rise.
This isn't the first time we've seen bitcoin prices plummet, and it won't be the last. Cryptocurrency is an extremely volatile and unpredictable investment, and such drops are an integral part of cryptocurrency investing. But there are a few specific reasons for the recent drop.
After China banned cryptocurrencies, some miners moved their operations to Kazakhstan. According to the Cambridge Center for Alternative Finance, by July, the country accounted for about 18 percent of global bitcoin production. However, Kazakhstan is now facing widespread protests over fuel prices and other problems. This has led to the government shutting down the Internet throughout the country, and bitcoin miners are unable to operate without an Internet connection.
There are always financial experts ready to declare the collapse of cryptocurrencies, while others argue that we are on the cusp of taking off to new heights. But these extreme viewpoints don't tell the whole story. Some factors can help bitcoin take off, while others can pull it down.
Then there are risks such as inflation in the U.S. and a new strain of coronavirus. Of all three factors, only Kazakhstan's mining problems are really behind it - and even then the turmoil in the country continues. Omicron is already here. It will probably have a less economic impact than previous waves of COVID, but we don't know yet how it will manifest itself. Inflation and anti-inflationary measures will be with us for the foreseeable future. This makes it unlikely that bitcoin will rise sharply in the coming weeks. There is also the prospect of increased regulation, but it has been looming on the horizon for months.
That said, it is also true that previous lows preceded new highs. In 2021, bitcoin lost nearly half its value over the summer before rising to a new all-time high in November.
Nevertheless, it was a very different market. The outlook for many asset classes in 2022 is much more modest than last year. Low interest rates, stimulus checks, and various economic easing measures meant that there was plenty of money in the market in 2021. And despite fears of a pandemic, people were willing to take a risk on a riskier asset class.
If you're considering buying on the downside, keep in mind that the price of bitcoin could fall even more. Make sure you understand all the risks and only invest money you can afford to lose. That way, if the worst happens and the market collapses, you won't feel bad, but you won't be financially ruined.
Cryptocurrency investments are different from the stock market. When you invest in stocks, you are buying a small piece of business. You can estimate the value of that business based on its earnings reports, balance sheets, and profit potential. Cryptocurrencies don't have the same support-you're not buying a piece of the company, but a token or coin. That's why sentiment is so important: ultimately, bitcoin is worth as much as people are willing to pay for it. This is also one of the reasons bitcoin is volatile because market confidence can rise and fall quickly.
Some argue that bitcoin is a kind of digital gold, a store of value that retains its value over time. This argument is supported by the fact that only 21 million bitcoins will be issued worldwide. Unlike traditional currencies such as the U.S. dollar, bitcoin's supply is fixed. In theory, this could mean that its price will rise over time.
That's not the only reason people buy bitcoin. Some believe it is the future of money or at least the future currency of the Internet. Bitcoin has made tremendous strides in terms of acceptance in the past year, which confirms this idea. Bitcoin is not only being accepted by more and more people, but also by more merchants, and it has gained the support of institutions.
Over the past few years, the world has become familiar with bitcoin. It is still a risky investment, but over time, with favorable factors, there is every chance that it could eventually recover and surpass its 2021 highs.
As long as the price is below the 47000.00 level, follow the recommendations below:
Time frame: D1
Recommendation: short position
Entry point: 42323.00
Take Profit 1: 37000.00
Take profit 2: 33000.00
Alternative scenario:
If the level of 47000.00 is broken-out, follow the recommendations below:
Time frame: D1
Recommendation: long position
Entry point: 47000.00
Take Profit 1: 52000.00
Take Profit 2: 57000.00
