Few cryptocurrencies have been hyped as much as Bitcoin has. To some people, Bitcoin has become a type of religion, no less. Even today, believers in the most well-known cryptocurrency argue strongly in its favor and expect it to reach new heights at prices such as $100,000 USD per unit. Others expect it to plummet further and even reach zero in value. Recent developments in the cryptocurrency sphere are mostly bearish in nature. Where will Bitcoin go from here?
Will bitcoin continue to decline?
The last few days have been brutal for Bitcoin buyers. The price dropped from around 39700 USD down to 31100 USD or below. The next support level is around 29300 USD. Should the price break this level of support, then we may be looking at a steep decline that could reach as low as 10,000 USD per Bitcoin.
How to trade Bitcoin from here?
The recent movements have implications for how to trade Bitcoin at the current levels. Short positions are currently preferred to long ones. Most indicators are giving signals that the price will continue to decline.
The strength of the US Dollar keeps cryptocurrencies weak
One factor behind this decline is the strength of the US Dollar. The Fed has recently hiked rates by half a percentage point and is expected to maintain its hawkish tone for a while. This keeps the demand for the Dollar strong, given the higher potential return, and it naturally has the opposite impact on all assets that are priced in US Dollar including Bitcoin.
Another factor keeping the Dollar strong is the recent decline in equities around the world, which has spurred a climate of fear among investors. Worrisome investors tend to seek safe havens such as the US Dollar when risky assets do not perform well. The result is more demand for the greenback and weakened cryptocurrencies.
While the inverse correlation between the USD and crypto-assets is not perfect, it is still meaningful enough for crypto traders to pay attention to it and take it into consideration.
What can reverse the current bearish trend?
Bitcoin holders may be waiting for a turn of fortunes as they wish for the price to resume its previous upward trend. This might not happen before 2024 when another Bitcoin halving period is set to begin.
There is still a long time until 2024 and many things can happen before then. Governments are more actively regulating Bitcoin and other cryptocurrencies, and are imposing rules on exchanges as a means of direct or indirect oversight. This tends to spook investors, who see Bitcoin as one key method to avoid supervision by the authorities and as a currency for renegades.
In addition, governments are in the process of launching their own digital assets, which are called “central bank digital currencies”, or CBDCs. If successful, those currencies are likely to induce a massive change in the global financial system, and they might effectively replace cryptocurrencies.
Bitcoin’s prospects do not seem great at the moment. If it breaches the final support level, we might be looking for a continuation of the bearish wave that can take the price down to 10,000 USD. Bullish positions are not encouraged at the moment.