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After Bitcoin Crash: What course development will we see in the next few months? – Invest now?

 


What happened to the Bitcoin course?

The Bitcoin has lost massively in value in the last 7 days. The price was still over $39,000 about a week ago. Within a few days, Bitcoin lost massively and the price went below $35,000. This fell the important $35,000 mark, which has repeatedly been the lower resistance in recent months and has held up several crashes in the past.

But after that, the Bitcoin crash continued. After Bitcoin stabilized at $32,000, Bitcoin fell massively again and even went below $30,000. In some cases, the course ran towards $ 26,000 . In the days that followed, bitcoin surged back up and back above $30,000. But what does the further Bitcoin price development look like?


What triggered the negative Bitcoin price development?

Bitcoin has already lost massively in value in the past few months in 2022. Bitcoin was still above $68,000 in November 2021. But in the following months we saw extremely large crashes in the Bitcoin course. Since the turn of the year, the Bitcoin price development has been consistently negative, with the exception of a few recoveries after crashes. 

There are many reasons for the negative Bitcoin price development. The factors that will affect the Bitcoin price in 2021 and 2022 are completely new compared to previous years. The market has changed tremendously compared to 2017 and 2018 when the last major bull run happened. The following factors make Bitcoin so difficult.


1. Increase in key interest rates and tighter monetary policy 

In recent years, the central banks in the US and Europe have operated extremely loose monetary policies. Policy interest rates plummeted to spur the economy back on after the 2008 financial crisis. This policy has hardly changed in the last 5 years. This made safe investments such as savings accounts unattractive.


However, low interest rates ensure that risky investments such as shares and Bitcoin, as the most important cryptocurrency, are becoming increasingly popular. Institutions in particular have invested heavily in Bitcoin in the last 2-3 years. But inflation caused a rethink.

The key interest rate was raised by 0.5% by the American Fed. This means that these risky assets are becoming less attractive. 0.5% was also higher than the forecast 0.25%. This probably led to the last massive Bitcoin crash.


2. Dependence on the stock market

In recent years, the crypto market has been very autonomous. While other investments sometimes went up and sometimes down, bitcoin and thus other cryptocurrencies did not follow this development. This was because the market was highly unregulated and mostly driven by retail investors.


But in the last 2-3 years, the Bitcoin price development has adapted more and more to the classic financial market. Above all, the prices of tech stocks on the NASDAQ correlate with the Bitcoin price. Now more institutions are invested in Bitcoin. Bitcoin is becoming more and more dependent on developments on the classic stock market.


3. Heavy speculation in the foreign exchange market

Bitcoin financial products have become more and more popular over time. The Bitcoin futures in particular can be used by speculative investors to benefit not only in a bull market, but also from falling prices. Bitcoin futures can be purchased on popular Bitcoin brokers such as eToro . 



Due to the many speculations, the risk increases that slight drops in the Bitcoin price will develop into veritable crashes . Because especially in the last few months, many speculative investors liquidated their short positions (“bets” on bearish Bitcoin). This reinforced the negative Bitcoin price development. 


What could the short-term Bitcoin price development look like?

In the last 1-2 days, the Bitcoin price has recovered and went back above $30,000. This mark could now establish itself as a new lower resistance of the Bitcoin price. This would be extremely important for a positive Bitcoin price development in the coming weeks. 


For a long time, $35,000 was considered the mark that Bitcoin could not undercut in 2022. At $27,000 we saw bitcoin support and now the price was able to surpass $30,000 again. This level is a good starting point for a medium-term recovery.


What could the Bitcoin price development look like in the second half of 2022?

Bitcoin is now officially in a bear market. The question will be whether this bear market will continue for several months or even years or whether we will see new price developments in Bitcoin compared to the past. A lot is still very uncertain at the moment. Almost nobody had predicted this development in November 2021.


What speaks for a more positive Bitcoin price development is a possible absence of the negative factors mentioned. With the increase in key interest rates, the factor that is probably affecting Bitcoin most negatively is now over. Stronger increases in key interest rates in the coming months are probably out of the question.


With the renewed crash, the majority of speculative investors have probably been washed out of the market. This makes such massive crashes as in the last few days less likely again. In fact, we could see healthy bitcoin price action in the second half of the year.

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