Bitcoin price has been punched in the face recently. A coin that was trading at $69,382 in November is now hovering at about $30,000. In fact, the coin crashed to a low of $25,000 on Thursday as many holders rushed for the exit and demand dried. As a result, investors have lost hundreds of billions during this crash. So, how low will Bitcoin go?
Why has Bitcoin plummeted?
The great unravelling of Bitcoin and other cryptocurrencies has been blamed on a number of factors. First, as BTC price started to drop, demand started drying up. Second, on-chain data showed that the number of Bitcoin buyers was in a downward trend.
Second, the coin dropped because of fiscal reasons as the stimulus packages that were implemented in 2020 and 2021 faded. Many people used their stimulus checks to buy Bitcoin and other altcoins.
Third, the market is basically in a downward trend, as evidenced by the collapse of most stocks. The Nasdaq 100 index has fallen by over 24% from its all-time high. A look at many favourite stocks like Amazon, Netflix, and Meta Platforms shows that they have all crashed by double-digits.
The driver of all this is Jay Powell and the officials at the Federal Reserve. They have already hiked interest rates by 0.75% this year, and they point to more hikes. The bank is also preparing for quantitative tightening policies in the coming month. If this pace continues, analysts expect that interest rates will end the year at 2.7%. However, in a statement, Jay Powell warned that:
“The process of getting inflation down to 2 per cent will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels,”
How low will Bitcoin go?
So, the biggest question is on how low Bitcoin will go. As you possibly know, the direction of Bitcoin will also affect that of other altcoins like Ethereum and Cardano. First, we have to admit that we are in a broad downward trend despite the relief rally that happened overnight. Second, the weekly chart below shows that the BTC price formed a double-top pattern.
Therefore, in my view, I believe that the next key reference level will be at the 2018 high of $19,734. If it moves below this level, the next point will be at $11,350. The bearish view will be invalidated if Bitcoin moves back above $40,000.