The current bear market is one of the most challenging periods in the history of the crypto and blockchain industry. Scandals, including the collapse of the Terra ecosystem and the failure of crypto companies like Celsius, Voyager and FTX, have shaken investor confidence in bitcoin and the crypto market as a whole. However, this does not mean that bitcoin is dead.
While there are good reasons to believe that the crypto-currency market will take some time to recover, it is wrong to conclude that bitcoin is dead. The world’s largest crypto-currency may be experiencing one of the most challenging market trends of the past decade, but its story is far from over.
In this article, we’ll show you the reasons why the price of BTC has fallen so much, leading many investors to wonder if Bitcoin is dead. We will also highlight Bitcoin’s historical performance, which has shown us that BTC is able to fully recover from drops as large as 80%.
Why is bitcoin down?
Volatility and unpredictability have become synonymous with Bitcoin and other crypto-assets. So while crypto-currency prices can post impressive gains over very short periods of time, the crypto markets are also vulnerable to major price collapses. Let’s explore the main reasons why the price of bitcoin has fallen so much from its all-time high in November 2021.
Macroeconomic reasons for the bitcoin crash
The 2022 crypto-currency bear market was exacerbated by uncertain macroeconomic conditions, including rising inflation, which prompted central banks to raise interest rates. Of course, there is also the war in Ukraine, which has negatively impacted geopolitical stability and also disrupted markets for important commodities such as grains, oil and natural gas.
In such an environment, it’s not surprising that investors have pulled their money out of high-risk assets like bitcoin. Of course, this is to be expected, given the nature and volatility of the crypto sector. However, bitcoin has shown its resilience time and time again and there is a good chance that it will recover in the future.
In general, global financial markets experience price fluctuations in the usual way. Several factors contribute to this. In recent times, the following issues have contributed significantly to price fluctuations in various financial markets:
- The Covid-19 pandemic
- The war in Ukraine
- Rising interest rates and inflation
All of these factors have also affected the crypto-currency market, leading to a downward spiral in crypto-currencies like Bitcoin, Ethereum and others.
Crypto-currency specific factors for the Bitcoin crash
Bitcoin fell below $20,000 for the first time since 2020 in June 2022. This was partly caused by Celsius Network’s decision to suspend withdrawals and transfers, citing conditions “extreme“. Celsius Network was a major crypto-currency lending company.
As we suggested earlier, a good number of other crypto-currency companies have gone into insolvency in recent times. FTX, which was one of the largest crypto-currency exchanges in the world, collapsed in November 2022, leading to another round of crypto-currency market downturns. Like other digital assets, bitcoin was also affected by the FTX collapse and subsequent fears of contagion in the crypto industry that would force major players to sell their coins.
Prior to the FTX collapse, the price of bitcoin had been stable for some time, including October 2022. Prices did not frequently fall below $19,000, but generally stayed low at that level during that time.
In addition, bitcoin and other major crypto-currencies have experienced steep and significant selling. As consumer confidence declined, panic set in and massive selling occurred on various platforms.
The historic performance of the bitcoin market: Is BTC dead?
Unlike conventional investments like stocks, bitcoin has no underlying asset or what investors like Warren Buffet would call intrinsic value. As a result, changes in the price of bitcoin are primarily determined by speculative investments and predictions about whether the price will rise or fall in the future. It is a highly speculative market, which is one reason why the price of bitcoin can fluctuate dramatically, even in a single day.
Historically, bitcoin has had its ups and downs, which can be attributed to a variety of factors, including those we have discussed so far.
Here are some important events that have negatively affected the price of bitcoin in recent history:
- November 2022 – The FTX exchange was deemed insolvent after becoming unable to honor customer withdrawal requests. After a potential buyout deal with Binance failed, FTX filed for bankruptcy.
- June 2022 – Citing “extreme” circumstances, Celsius Network, a major crypto-currency lending company, stopped withdrawals and transfers.
- May 2022 – The Terra ecosystem, consisting of the LUNA token and the UST stablecoin, suffers a catastrophic collapse triggered by the system’s unsustainable economics.
- May 2021 – Tesla CEO Elon Musk announced that the electric car maker would stop accepting digital payments due to concerns about the environmental effects of “mining” crypto-currencies, or using computing power to create crypto-currencies like bitcoin.
Here’s how bitcoin has fared this year so far compared to other major crypto-currencies:
*Price data collected on February 9, 2023 at 16:00 UTC.
Does bitcoin have a future?
Given bitcoin’s track record over time and its historical price trend, it is likely that bitcoin still has a bright future ahead of it. In terms of bitcoin’s price, the crash of 2022 is far from unprecedented. Bitcoin has already experienced withdrawals of 80% or more and managed to recover.
What will the price of bitcoin be at the end of 2022?
One of the main factors in bitcoin’s favor is that it is considered the fundamental asset of the crypto-currency market, which makes it attractive to sophisticated investors who want to gain exposure to crypto-currencies but don’t want to buy riskier altcoins. Several well-known companies now hold BTC on their balance sheets.
A significant number of influential people are also holding BTC. The Winklevoss twins, Michael Saylor, Elon Musk and Changpeng Zhao, the creator of Binance, are just a few examples. It is also believed that many wealthy and influential people have purchased bitcoins anonymously.
According to our bitcoin price prediction, the price of the coin could initially drop to around $15,000 per token. However, there is a good chance that it will rise again and reach a maximum of $20,000 per coin by the end of 2022.
What is the bitcoin price prediction for 2023?
While this bear market has been particularly prolonged, it’s important to understand that bear markets, like bull markets, eventually end. According to our algorithm-based bitcoin price prediction for 2023, the largest crypto asset could see a recovery in the second half of 2023, but not before dropping to new lows beforehand.
According to our BTC price prediction, we could see BTC drop to $10,000 in the first half of 2023. However, the algorithm predicts that BTC will end the year on a high note, reaching $40,000 in January 2024.
Is bitcoin a good investment in 2023?
Bitcoin could be a good investment in 2023 because of several factors. The first reason is simply that Bitcoin is trading well below its all-time high prices, which could mean that BTC is currently trading relatively cheaply. In addition, the next halving of bitcoin will occur in 2024, and buying BTC before a halving has historically been a good move. However, the price of bitcoin could fall due to macroeconomic factors, as many economists predict a global recession will occur sometime in 2023.
Overall, bitcoin is probably the best crypto currency to buy for long-term crypto investors. BTC has the longest history of any crypto-currency, and remains comfortably the largest crypto-currency in terms of market capitalization.
So, is bitcoin dead?
The volatility and unpredictable nature of bitcoin, coupled with the recent prolonged bear market in the crypto space, has unsurprisingly led many crypto-currency investors to wonder if bitcoin is dead in 2022. However, there is a good chance that Bitcoin is far from over, and its past market trends inspire confidence.
BTC is certainly not dead, but it is experiencing a significant decline, just like other digital assets. The bitcoin price crash was also influenced by macroeconomic factors outside of crypto, which we can expect to improve when the market cycle reaches its bullish phase again.