Is Bitcoin About to Fail Again?

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Bitcoin has had a strong 2024 so far, with the price reaching a new record high of over $70,000 in March.

The launch of a number of bitcoin exchange-traded funds (ETFs) and halving in April likely helped propel the original crypto asset higher.

The price has fluctuated between $60,000 and $70,000 since then, but will it continue to rise from here or will it fall back to lower levels?

In this article we explain:

What is happening to the price of bitcoin?

Since May 2024, the price of bitcoin has been in a consolidation pattern for several weeks. It traded in a range slightly below $60,000 to a peak around $70,000. The price started the year near $40,000, so current levels remain significantly higher.

A swing from $70,000 to $60,000 in a matter of days is much more than we would see in the stock market, for example, except in the most extreme circumstances, like the start of the pandemic.

View more: How high could the price of bitcoin go?

Will bitcoin crash?

It is impossible to predict Bitcoin price movements with certainty. Given Bitcoin’s volatility, it is likely that the price will again experience a dramatic drop at some point in the future, which could be defined as a crash.

When this will happen is very difficult to say. While past performance is not an indicator of future results, looking at historical patterns, bitcoin’s major declines did not occur in the year following the halving. In fact, the opposite has been true. The price of Bitcoin increased significantly during the year following the halving.

However, the price increase seen after previous halvings was not a smooth and steady uptrend. Day after day and week after week, the price moved up and down significantly, within a broad long-term uptrend.

Previous crashes have occurred more than a year after the last halving. If this pattern repeats, a breakout will occur in late 2025 or 2026, given that the last halving occurred in April 2024. However, there can be no certainty that the pattern will repeat. Events may occur that completely invalidate past patterns and investor expectations.

View more: Is cryptocurrency an investment to consider?

Is the price of bitcoin rising?

This is impossible to know for sure. Proponents expect its price to continue to rise in the long term, although it will remain volatile. The introduction of ETFs and the recent halving are probably two of the main reasons why many people believe the price will rise.

ETFs provide institutional investors and non-technical people with easier access to the asset. Institutions collectively have trillions of dollars in wealth to invest, so if just a small fraction of that money goes into bitcoin in the next few years, the price could increase significantly.

The halving means that the amount of new bitcoins created each day is now half of what it was before April 19th. This means that the supply is more restricted. Lower supply with equal or increasing demand typically increases the price over time.

What makes bitcoin so volatile?

Bitcoin is volatile for several reasons. Firstly, it is a new type of asset with no inherent value beyond what bitcoin investors are willing to pay for it, which makes its valuation more difficult. It was only invented in 2009, in the aftermath of the global financial crisis. Although 15 years may be a long period of time for an individual, it is very small relative to the lifespan of other investable assets such as stocks and gold.

Liquidity can be another volatility factor. The less asset is available for buying and selling on exchanges, the more volatile its price will be. Although bitcoin’s liquidity on exchanges is much higher than it was in its early years, it remains less liquid than traditional assets such as shares of large companies.

Another big reason for volatility is regulatory uncertainty. While this has eased to some extent with the approval of bitcoin ETFs, the regulatory framework for bitcoin and crypto in general remains unclear.

See more information: What are ETFs and are they a good investment?

What Caused Bitcoin’s Last Big Crash in 2021?

As of March 2021, the price of one bitcoin is around $46,000. But the market turmoil that followed caused this to fall by almost two-thirds.

In June 2022, bitcoin fell below $20,000 for the first time since 2020. This was driven in part by the decision by Celsius Network, a major U.S. cryptocurrency lending company, to freeze withdrawals and transfers, citing “extreme” conditions. ”. There have also been other crypto-related meltdowns, including crypto asset Luna and a crypto hedge fund called Three Arrows Capital. This helped fuel a crash in the cryptocurrency market.

However, the most significant blow to crypto in 2022 was likely triggered by the collapse of FTX in November. This was a major cryptocurrency exchange that handled around $1 billion in transactions per day. Its collapse had a knock-on effect on other cryptocurrency exchanges. In November 2022, the price of bitcoin fell to around $16,000, a far cry from its peak of around $65,000 a year earlier.

See more information: Should you invest in European stocks?

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