Bitcoin Price Going Down: How Investors Should React?
In 2021 end, Bitcoin price reached its highest-ever of $68,789.63. However, sometime later, the picture of the chart changed dramatically, and the BTC rate began to go down inexorably. This was the crypto winter.
At the time of writing, the cost of one bitcoin is $28,081.90, but it looks like this is not the bottom yet.
There are several factors that have significantly affected the state of the BTC exchange rate and the crypto market as a whole:
- Acceleration of inflation in developed countries: The U.S. The Bureau of Labor Statistics reported that the core consumer price index (CPI) rose by 8.6%. Inflation excluding food increased by 6%. This is a record since 1981, and the statistics were worse than analysts’ expectations, which had assumed an increase of 8.3% for the CPI and 5.9% for core inflation. Major indices fell by 5-6%, and the US stock market has officially entered a bearish phase.
- Tightening monetary policy of different countries: High inflation means that regulators in the US (and now in Europe) will tighten the financial screws by raising rates. First of all, the US Federal Reserve System, which in May raised the base rate (according to which the Central Bank issues loans to commercial banks) by 50 basis points, to 0.75-1%. Because of this, people prefer to invest in assets that are less risky than cryptocurrencies.
- TerraUSD (UST) Stablecoin Crash and Related Proceedings: After the stablecoin lost its peg to the US dollar, the Luna cryptocurrency used to issue it collapsed by 76.4%. The Luna Foundation Guard, behind TerraUSD, has spent $2.9 billion in bitcoin to defend the token’s dollar peg — nearly all of its holdings. But this is not the only crypto company that has collapsed. A number of crypto projects have declared bankruptcy; one of the latest tragic cases was FTX, the second-largest crypto exchange in the world.
External factors are pulling investors away from decisions to invest in risky assets, and internal problems have completely undermined investors’ faith in crypto projects. All this has affected the most dominant asset in the crypto market.
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What are Bitcoin Price Predictions?
FTX’s liquidity problem and a number of bankruptcies that have already taken place could lead to a further drop in the Bitcoin exchange rate to $15-16 thousand. However, in 2023, the positions of the leading cryptocurrencies may begin to strengthen again after the US Federal Reserve reports a slowdown in the rate hikes.
This will lead to a fall in the dollar, an increase in the value of US stocks, and due to the correlation with them in the digital currency market, an increase in the price of the crypto. So, at the end of 2023, the bitcoin rate can reach $30-40 thousand, if not more.
According to a number of other experts, it is not worth counting on such a quick recovery of digital currency quotes. The crypto winter has already begun, and most likely, the thaw will not come until 2024. In the meantime, against the backdrop of instability, government bonds and gold remain protective assets, into which investors shift funds from cryptocurrencies.
What exactly crypto analysts agree on is that the value of bitcoin will never collapse to zero. Really, how many times has it practically risen from the dead and danced at its funeral? After all, if Bitcoin crashes, then the entire crypto market will go into oblivion, and this is unlikely to happen.
What to Do With Your Bitcoins?
Most crypto experts and seasoned investors recommend keeping your bitcoins with yourself, especially if you bought them at a higher price than it currently costs.
Sooner or later, the crypto winter will end, and the value of Bitcoin is likely to grow. Some enthusiasts are predicting a skyrocket to $100,000 per BTC, so the wait is worth it. If your portfolio contains nothing but bitcoins, it is better to diversify your savings by converting, for example, some of your btc into ltc or another promising coin. This can be done on one of the reliable anonymous crypto exchanges that do not store their users’ data.
What are all the options?
- Hold: If you believe in Bitcoin’s long-term potential and the technology behind it, you may choose to hold onto your Bitcoin and wait for the prices to increase.
- Sell: If you need the money or are not comfortable holding onto Bitcoin during a price dip, you can sell your Bitcoin for cash or another cryptocurrency.
- Buy more: If you have the financial means and believe in the long-term potential of Bitcoin, you may choose to buy more Bitcoin during a price dip. This strategy is known as “buying the dip.”
- Diversify: Diversifying your investment portfolio is generally a good idea, and cryptocurrency is no exception. Consider investing in other cryptocurrencies or assets to spread out your risk.
If you are still unsure what to do with your Bitcoin, consider consulting with a financial advisor who can provide personalized advice based on your financial goals and risk tolerance.