Bitcoin has been under massive selling pressure since it touched its all-time high value of around US$69,000 on Nov 10’2021. It touched a low of around US$25,400 in May 2022, falling more than 60% in a span of six-seven months. Presently, at the start of June 2022, it has been trading below US$30,000. So, you must be wondering whether it is the right time to invest in Bitcoin? Has Bitcoin formed its bottom, or will it slide more in the coming days? Let’s dig deeper to understand more in detail.
History Of Bitcoin Crashes
Bitcoin has been a quite volatile asset ever since its inception. Let’s take a look at how the price of Bitcoin has crashed in the past. In 2011, the Bitcoin price had soared to $32 from $2, but the incident of account hacking and stealing of Bitcoin, worth millions of dollars, at Mt. Gox in June made Bitcoin drop to one penny. In August 2012, its price fell by around 56% when the public learned about the classic Ponzi scheme bilking the investors.
The Bitcoin buzz among the investors saw new investors coming in, and the exchange Mt. Gox crashed due to large volumes in April 2013, and the hackers attacked, sending the exchange into complete shutdown, making the prices crash to $50 from $260. Further, the Bitcoin ban by China in December 2013 made its price lose 50% value overnight.
The crypto world also saw turbulent times from December 2017 to December 2018 due to hacks in countries like Japan and Korea and floating rumors about those countries banning Bitcoin. As a result, its price fell around 84% during the said period after touching a high of around US$20,000 in Dec 2017. Furthermore, the 2020 pandemic saw the global markets crashing, and even Bitcoin crashed by more than 50%, from US$10,000 in February to US$4,000 in March 2020. Bitcoin touched US$64,000 in April last year in 2021. However, it crashed to around US$30,000 in May, with Elon Musk backing off from his promise to accept Bitcoin payments for Tesla cars citing environmental reasons and China’s announcement to prohibit financial institutions from engaging in crypto transactions.
Has Bitcoin Formed Its Bottom For 2022 And Ready For Upside Rise?
The global markets have been under immense pressure recently due to inflation fears. Even the slump of Bitcoin from its all-time high of US$69,000 to around US$25,400 level can be attributed to the rise of interest rates by the U.S. Fed Reserve to combat rising inflation and the implosion of stablecoin terraUSD.
Bitcoin has support around the US$28,000 level as the price had reversed from it in Jan 2021 and even in July 2021. It tested a recent low of US$25,400 level on May 12’2022. However, there was a huge buying volume below the major support US$28,000 level, and the price closed above it on the same day. The fall of Bitcoin was more in the form of a bear flag pattern. First, the price fell from US$69,000 to US$33,000 in the form of a pole, followed by price consolidation testing its 200-day moving average and forming a flag. Finally, the price breakdown below the bear flag saw the slide down towards US$25,000.
It is important to note that the price has been trading below its 200-day moving average since Jan 2022. If the price finds support around US$28,000, then it can move towards its trend line resistance around US$33,000, and if it manages to cross over it, then it can again test its 200-day moving average around US$42,000.
However, it would be important to see how the price behaves once it tests its 200-day moving average again. The rise of Bitcoin won’t be easy as the price will meet sellers at all-important levels. Hence, the price has to cross its major resistances, and only a price close above its critical resistance at the 200-day moving average would indicate the first sign of bullish reversal.
It would be vital for the price to cross its critical resistance with rising momentum as it will help the new buyers join the upside movement and push the price upwards. A reversal is possible from hereon only if the price defends its support of US$28,000. The price breakdown below it can put selling pressure once again to test US$25,000, and a breakdown below the said level can even stretch to US$20,000. Thus, the price needs to hold the US$28,000 support level and cross its trendline resistance and 200-day moving average to show signs of meaningful reversal.
Bitcoin has seen meaningful correction ever since it touched its all-time high. However, the investors need to be cautious, and a meaningful reversal is possible only with the improvement of global cues. Hence, it is important to track the price action and make decisions accordingly. Moreover, long-term investors can look to invest in phases as it would help them participate if the price reverses or average their cost in case of price slide down.