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At the moment, its price ranges from $18k to $19k. It has already deviated from its support level of around $20k. If there are no strong buyers, it is possible to see a price at the $13k level. And if that happens, we will see a negative 80% correction from the all-time high. Currently, we are still at more than 70%.
Remember that Bitcoin goes down always to a negative 80% or more during a bear market. Set your expectations so that you will not be surprised anymore. It is painful, and we do not want that to happen, but the market does not care, so we have to learn how to deal with it, especially if this is your first bear market experience. And if you survive, you will be stronger. Let us check the factors that affect the price movement of BTC, such as inflation, incoming recession, interest hike, etc.
Looking at the daily chart, we cannot see a bullishness, even if the price plays along with the support level and gradually gets destroyed by the sellers. Based on the candle formation at the support level, there is no strong bullish candle, but it is the other way around instead. There are some buyers, but they are not that strong. Perhaps we must wait a couple of days or weeks to see its further formation. One scenario that may happen is the formation of weak candles from the last position, then dropping another leg down. Or it may also go up a little, but that would be a bear flag.
It has an immense chance of going down. So traders and investors are extra careful. Most of them are waiting on the sideline for positive market sentiment. They will only enter after it gets momentum from the support level. Most people expect another leg down because it shows that the selling pressure is still strong by looking at the candle, and no one catches it. That is because there are many forced sellers in the market. They do not want to sell, but they have no choice.
Why does BTC keep falling?
An example of this is the Three Arrows Capital. They are one of the big players in the crypto market, and they have already experienced liquidation due to leverage. And they are not the only ones who can encounter this. Many individuals or whales can have their positions liquidated if BTC continues to decline. Note that centralised and decentralised finance typically offer lending systems. And the whales and institutions provide collateral in the form of crypto.
Let us say, for example, that John puts collateral in the compound finance of Bitcoin, and the price of BTC at that time is 40k. Since he provided collateral, he can borrow a stablecoin that he can use for other things. John can withdraw it, trade, or participate in different exchanges. That amount that he put in BTC as collateral has a liquidation price. If the price of BTC falls to the 20k price level, his position will be liquidated. So what he can do to avoid his position getting liquidated in the compound is to top up BTC. But what if John has nothing to use for top-up and the BTC price continues to go down? His position will get liquidated. Without other options, the platform will sell it.
Imagine how many entities are available in the market that does this, centralised or decentralised finance. The market, in general, plummets because crypto is over-leveraged. If a lot of liquidation occurs all at once, it will create massive selling pressure in the market. And if there is no sufficient demand or buyers, the price will continue to crash. That is why the BTC must bounce back to the $20k price level and above and must sustain it. Because if not, many more positions will likely dissolve. Celsius BTC’s position, for instance, was not liquidated because they continuously top-up; perhaps, their liquidation price level is around $14k. The price of Bitcoin may go at the bottom if liquidation gets reduced and the public perspective is not on the selling side. In that case, the market may shift from bearish to bullish, and the number of buyers surpasses the sellers.
Looking at the past formations
On the chart, you can see all of these scenarios. A good example of price formation is at the end of the bear market in 2019. The scenario is very different between the 2018 and 2022 bear markets. 2018 is the year for retail sellers, and there are not too many leverages. We can say that the market is already at the bottom if it forms accumulation. It does not have to be exactly the same. We need to see the absence of lower low or lower high, a trading range with upward momentum. A higher low is one of the clear indications. It is a sign of possible trend reversal. And at that time, higher highs and higher lows happened next.
In 2020, the bottom market case was a flash crash. The sign of reversal at that time was the bullish pin bar. It is a representation of strong buying. And currently, we still do not see the same situation in BTC price action. If we see a small accumulation and no lower lows similar to the earlier example, what comes next is a higher low and higher high.
The best time to buy
So when is the best time to buy? Wait for a higher low. Until then, there is no buying opportunity at the current BTC position. Not unless one uses a cost dollar average or a long-term holding strategy. The current price is already cheap. But there is still a possibility of going down one leg from the current price to $13k. If ever it continues, we should wait for a climatic reversal, accumulation, or a higher low. Any of these will do, based on history. If the time comes that you are ready to buy, make sure you already have a crypto platform to use. It can be through exchanges or brokers. Between these two, the latter is better for beginners, according to experts. You can connect with them through a trader-broker connecting platform. Now that it is hard to make trading decisions, it is good to have platforms that can ease your trading journey.
Another thing worth noting is the effect of what the Fed does. The Federal reserve can crash and boom the stock and crypto market by turning on and off the money printer. Since the present inflation rate is high in the US, the Fed needs to hike the interest rate. It means that they are trying to kill the demand for the asset class to make the dollars stronger. There is not much credit ready for borrowers; the money printer is off. In this case, not much money will enter asset classes like stocks and crypto. Most people will most likely choose cash over asset class. Consequently, it could lead to a recession.
Closing Thoughts
So, the bottom is not yet here based on the current price formation of BTC and market sentiment. Many ask how long a bear market will last. Well, no one knows. No one knows because no one can predict the future. What we need to do is observe. And no matter what happens, no matter how long it takes, remember that, after a bear market, there is always a bull market waiting.
David Prior
David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.
