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Total crypto market capitalization has plummeted below $1 trillion today for the first time since February 2021, with Bitcoin (BTC) and other top altcoins registering record losses. BTC, especially, has begun the week at its 10-month lowest since May 2021. At the time of writing, BTC is struggling to keep itself afloat at the $24,000 mark, down by 13% from the previous day. Multiple macro-economic factors have contributed to the latest dump. Many investors are now wondering how low BTC can go before there is a change in sentiment and price trajectory for the crypto asset class. In this article, we explore the same.
Currently, BTC has pulled down below a parallel channel coinciding with its 50-day exponential moving average of $31,000. It is now below its trendline resistance line which it had flipped to a support level earlier.
BTC has faced multiple correction patterns repeatedly in 2022 for multiple reasons. A 40-year high inflation of 8.6% in the US had both stocks and cryptos tumbling down this weekend. While May's Terra-UST debacle contributed to the negative sentiment in the market, DeFi platform Celsius stopping withdrawals today has worsened the crypto market prospects further.
Source: TradingView, Binance
On a cyclical basis, Bitcoin has dangerously fallen below the macro low range. Bears are maintaining the selling pressures and a push toward the .236 fib level of $29,400 would be essential to restore market confidence. Any movement below the current level will have BTC testing support at $22,000.
Bitcoin has dropped 80% before
New crypto investors may like to believe that this extraordinary dump is creates doubts regarding the ecosystem’s sustainability. However, this has happened at least before.
Bear markets have been brutal for BTC in the past. In 2014 and 2018 bear markets, BTC dropped more than 80% from its market cycle highs but registered new highs later. For example, in the image below we can see that BTC dropped from nearly $19,000 to $3,000 in 2018.
BTC dropped 80% in 2018 | Source: TradingView
An 80% drop from BTC’s November 2021 high of $69,000 would be near $14,000 in this cycle. Therefore, BTC has room to drop even further.
Within the crypto ecosystem, Bitcoin remains the go to asset as large investors redirect capital from altcoins to the number 1 crypto. This is visible in the growing BTC dominance (BTC share of market cap) – BTC.D is now above 47% (up from 42% last month).
Investors are advised to go Bitcoin heavy to navigate the current bear market. With altcoins, the risk of the project closing down always remain.
On an immediate basis, stacking cash for an eventual crash will be prudent. The market low is yet to be found with potential for another 20-30% drop. Investors can park some capital for regular weekly DCA to gain exposure at these lower rates but continue to hold a majority of funds to deploy when the market fully capitulates and then gains in health.
Investors who navigate the bear market well will be well served in the future as Bitcoin and the crypto market recovers over the next two years.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.