Is Another Bitcoin Crash Coming?
Wait! Don't freak out... yet. The past few years have had Bitcoin and other cryptocurrencies thrown against the rocks, sometimes taking critical hits and other times flying high. In the realm of social media, people can influence markets, prices, stocks, and more - just ask Elon Musk, potentially the biggest free advert any meme, currency, or digital currency could ask for.
Articles like these are often formulated to make Bitcoin investors sweat, force them to rethink their position and investments, and more commonly, click on the article. Unfortunately, that's not my writing style. If you're going to click on this article, it's to find value in the information presented. I'm going to bring you up to date - relevant information on the cryptocurrency markets, how a Bitcoin crash COULD happen and how the world will react if it does.
I'll cover topics like El Salvador, Shiba Inu and how the cryptocurrency market was in 2021. Information sourced from outside 2022 is only historical; please note this is NOT investment advice. I'm going to bolden a sentence later in the article. When you read it, you'll know why we've put this disclaimer here. From Wall Street to BitPrime, here's my take on if another Bitcoin crash is coming.
Firstly, before we dive into the well-informed research, let's have a look at what Google has to offer us if we were to google this question:
It’s the easiest research you could ever get, right? Google has algorithms that promote relevant, helpful articles like these, but all it does is nurture financial fear, relying on that solely to report such a dense topic, often in 500 words or less.
How Could a Bitcoin Crash Happen
The main reason questions like these are asked is that people are always scared their investments won't pay off, and fair enough, you take a financial risk for every investment you make. Speculating on possible returns can be intimidating unless you do enough research; the Google search above doesn’t represent sufficient research. So, why are people speculating a crash? Forecasts can create different results, but if we are to look at the price of Bitcoin as seen below:
During a 12-month period, that price has increased by 24%. How does this create panic? Well, if you look at the distribution from March 2021, it sat around $90,000 in November 2021, but from there, it takes a hefty drop. Factors contributing to this are mainly China's government crackdown, unpredictable tweets and other external interventions.
September brought a $10,000 sting by El Salvador adopting it as legal tender. You can see that twice in 2021 - almost all crypto gains were lost, however like every economic recession - a boom was to follow, and that principle rings true again. Crypto traders have continually fought back against the dips. There is no solid evidence that crypto will just fall off the side of a cliff one day.
Crashes happen in every market - but the considerable speculation that it will cause "The Mother Of All Crashes" (Michael Burry) isn't warranted until a more in-depth analysis is done at a later date. There is far too much speculation over too few facts.
Reasons Bitcoin can Crash in 2022
A big reason I would say that Bitcoin could crash is ironically one of the main reasons it's been so successful - Government Intervention (or lack thereof). The most notable attack on Bitcoin was by the Chinese Government, which essentially banned crypto mining in June 2021. Therefore the Chinese crypto miners had to migrate to other networks, which saw the decline in network hash rates. Many people speculated this to mean the beginning of a more significant crypto crash.
Shiba Inu is up next - and for this, we're going to use some stock market terminology, the 'greater fool' theory, which essentially means that one can make money by buying overvalued assets and selling them for a proﬁt later on. That illusion has been broken with Shiba Inu - after Elon blew them out of the water with one singular tweet. Nearly one year on their market cap has dropped 59% from 39 million to 12.5 million. You can see that many forecasters and predictors are trying to build a bridge between Shiba Inu and Bitcoin - using the former as an example to 'warn' prospective investors or current ones.
The next term I will use is economically inclined, but bear with me: first-mover advantage, something Bitcoin has that almost any other crypto doesn't (except for Ethereum). Because they occupy the largest market share in the crypto market, Bitcoin can dictate price and indirectly affect other cryptocurrencies. This means that when you compare Bitcoin to Shiba Inu, it is unfair to draw comparisons when one is well-established and the other a 'meme' currency that has already wiped three fifths off their market cap in six months.
Who Will Benefit if Bitcoin Crashes?
This is definitely one of my favourite questions because who's winning and who's losing if it happens? There are two main answers you'll find when looking for the beneficiaries of a Bitcoin crash.
- People who short before Bitcoin crashes and buy the dip will make existential wealth.
- Those who predicted the crash will be labelled heroes.
Neither satisfies me enough; we have seen crypto take some decent concussions recently but bounce back impressively. So, long-term investors with a buy-and-hold strategy aren't too worried about dips because they are playing the long game. Everyone knows crypto can be volatile; that's why it's so popular. People have earned monumental gains from it. Investors shouldn't act rashly in accordance to dips, don't switch up your strategy because of one article or one dip. I spoke in my other article on Risk, Research and Relevance:
Risk means don't invest more money in investments than you can afford to lose! Due to its high volatility, be well informed before making final decisions.
Know what you're buying into before biting at the bait! You should know the company/developers before you buy because you're putting your trust in them when investing in something.
Relevance is the information you are seeking. It's vital to ensure that you're reading verified, timely information to infer your decisions when browsing the latest news.
This can be important because dips are going to happen, and if you're stressing out watching your crypto every day - you may just have too much riding on it. Volatility can be challenging for individual investors because an investment is more than just an asset to you. It's fixed parts of your income committed to hopefully making some money back. There is no doubt that fluctuations will continue to happen with the onslaught of COVID-19 and the slow introduction to more government intervention (especially from the United States).
"We just bought the dip" - The President of El Salvador Tweeted, yes, the leader of a country tweeted that. And buy the dip they did, 410 Bitcoin for USD 15 Million (worth $23 million now), so firstly they became the first country to adopt it as a legal tender, and now they've put 15 million dollars into it. Other governments are working on regulations, while El Salvador is getting it as mainstream as possible in the country.
Elon Musk - need I say any more? He has become a sort of Crypto Daimyo. He has long been involved with crypto and is partially responsible for the success of meme coins like Shiba Inu and Dogecoin, and also the downfall of others. He has drawn widespread criticism for his involvement in crypto and adding to the market's volatility. His company Tesla bought 1.5 Billion dollars worth of Bitcoin in 2021. It saw the price increase by 20% - the 'Musk Effect' has become a great asset to start up cryptos that happen to make it big based on a breed of dog or a meme he finds funny. Scary Stuff!
Predictions for Crypto
Bitcoin price predictions have flooded almost every platform - there's nothing humans enjoy more than insurance, security etc. If someone can offer us a Plan B, we blindly tend to take it. This can be dangerous because if you are receiving public information, you can guarantee that many other people are getting the same knowledge, which decreases your possible capitalisation (You found it!).
The crypto market has outlasted all speculation so far, so to warrant any real worry would be disingenuous. Despite all price changes and volatility, Bitcoin is still worth double what it was a few years ago. I wouldn't be surprised if we see Bitcoin tank and then boom up to $100,000. It is just designed to bounce back. Most predictions vary; surprised? There is currently almost 19 million bitcoin in circulation, with minting stopping at 21 million. The fixed supply with increased demand is what will push Bitcoin's value through the roof as we move through this year.
One estimate has Bitcoin at 12.5 Million by 2031! That's if we make it that far! Crypto is continuing to become more mainstream to its benefit. Bear in mind, when you read any predictions, they are analysed of about a 10-year data log of previous increases and dips and forecasted from that - very rarely can one accurately predict proper price points without ending the sentence with "I think". So that's the rundown from me. Now you've read this article and put your mind at ease, what's the next step?
It's time to think about applying for a BitPrime account - we make crypto investments affordable, simple and always ensure your best needs are met. If you're just getting started, I recommend reading this article covering how it works, or if you're more curious, try Cryptocurrency: Why to consider it now and how to get started safely. It's a great time to be in digital assets and an even better time to be a BitPrime customer. Our website has everything you need and more to get you started and on your way to success, and if you feel like reading more, check out our blog. That's where you'll find me; I hope to see you there.
About the author:
Austin Watene is a writer who has collaborated with a multitude of different partners in Business, Social Media and News Companies. He produces quality content in which he aims to resonate with viewers, or at least raise their eyebrows to the new opportunities of tomorrow.
The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.
Last updated: 17/02/2022