$40K or $100K – Where Will Bitcoin Go?

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Whilst Bitcoin and some of the major altcoins have been correcting alongside the stock market, major analysts in the crypto space have been proven wrong about Bitcoin’s price target for 2022. With the rapid spread of the new Covid-19 variant and new information emerging from the Federal Reserve, are we going to see Bitcoin fall to $40K soon?   

Bitcoin’s Current Price Performance

  In Mid-November, Bitcoin began a downward decline as the cryptocurrency markets began correcting. On November 10, BTC crept past an all-time high of $70K. But the uptrend only lasted a few days, as Bitcoin slipped back to $46,000 on December 20, according to Coinmarketcap.   The current consensus among investors is sceptical for a variety of reasons. Cointelegraph states that the United States Federal Reserve did manage to give a short-term boost, but the progress has not been as good as last year. Not only has cryptocurrency fallen, but stocks have massively corrected amidst the rise of the new Covid Omicron variant.   “Global stocks have lost $1.8 trillion in market cap this week as investors reacted to hawkish Fed pivot, the spike in covid cases and find themselves positioning into 2022 of already elevated valuations. Stocks still worth $118 trillion, 140% of global GDP”, says Holger Zschaepitz, a German-based economist.    Despite Bitcoin being up against the September lows and the May market crash post-China’s cryptocurrency crackdown, the majority of cryptocurrency investors’ and analysts’ price targets for 2021 have been far off from the current levels.   One of the most trusted Bitcoin price tracking accounts is PlanB, a Twitter crypto analyst who successfully predicted Bitcoin price predictions in September and October 2021. PlanB has recently updated his thoughts on Twitter, suggesting that his price targets for 2021 might not be matched.   https://twitter.com/100trillionUSD/status/1472241754837557256?s=20   While the analyst is confident about Bitcoin’s price in a long-term scenario, it is important to analyze the factors that are affecting the crypto token in the short term.  

SEC Delays Bitcoin Spot ETF Decision

  In October 2021, Bitcoin’s price began a month-long rally after the first-ever Bitcoin-related ETF (Exchange-traded funds) was confirmed by the Securities and Exchange Commission in the United States. Though groundbreaking news, investors in the futures market were keen for the SEC’s news on a spot ETF fund. The current Proshares Bitcoin Strategy ETF (BITO) only allows investors to gain exposure to Bitcoin through the stacked ETFs. A spot Bitcoin ETF on the other hand allows investors and traders to directly invest in a bundle of ETFs that holds Bitcoin directly.   For the last two months, Grayscale, the company that released the Proshares ETF, has been trying to get the approval of a Bitcoin spot ETF from the SEC. The official decision was to be announced later this month, but the SEC has decided to push back the announcement by another 45 days. The SEC will have the option to approve or disapprove of the decision by February 6, 2022.   In explaining the reason for the delays, the SEC wrote:   It is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received”.   The vague terminology has likely sent the cryptocurrency market in fears of another rejection since the SEC has rejected Bitcoin spot ETFs in the past. The delay has not stopped Grayscale from firing back at the SEC and sharing their disapproval of the way the matter has been handled.   Another announcement that could affect Bitcoin’s price in the short term is the possibility of a hike in interest rates by the Fed.      Fed Plan To Hike Interest Rates   Jerome Powell has put investors in a state of panic, after the latest announcement from the Federal Reserve. The chairman decided to retire the word ‘transitory’ – when discussing the current state of the economy in congressional testimony. The term transitory refers to inflation, which has been increasing since the pandemic due to an increased number of bonds purchased being made by the Feds to revamp the economy.   The belief is that the Federal Reserve is likely to bring an end to bond purchasing sooner than expected, as the worst of the pandemic is believed to be over. Since the Fed increases bond purchases to increase spending in the market, stopping such an act is normally followed by hiking interest rates to limit spending.   Powell stated, with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support,”   But he also mentioned that the current increase in Covid cases may pose risks to this decision. This news first hit tech stocks the hardest, since the industry is more sensitive to higher interest rates than others. The comment also indicates a possible reduction in global liquidity, which will likely raise leverage costs or borrowing costs for financial assets.   Crypto markets went into a similar panic mode once Powell’s comments went public. On December 17, more than $2 billion worth of long positions were liquidated across global cryptocurrency exchanges, almost 50% of which belonged to Bitcoin futures. This plays in with Bitcoin’s volatile pumping and dumping, which investors experienced over the weekend.   From tech stock prices, the announcement is showing its after-effects among markets related closely to these digital assets – including crypto-related stocks, ETFs and other crypto-heavy trusts. For example, Marathon Digital Holdings (Bitcoin-mining stock) was down 10% during the middle of December, while the Grayscale Bitcoin Trust fell by 10% as well. Stocks of cryptocurrency exchange Coinbase Global corrected by 4% as well.   Bearish View Among Analysts   Nicholas Cawley, a DailyFX analyst had the following to say on the recent price volatility – “A toxic combination of low liquidity, excessive leverage, and overconfidence led to this weekend’s crash with most cryptos printing multi week lows as prices went into freefall.”   From Bitcoin’s technical outlook, DailyFX predicts a volatile price in the short term. Following a huge fall from the highs of $59K at the start of the month, the analysts at DailyFX think the coin could correct even further before we see support. One important level is $40,000, which could act as a good support barrier and a good entry-point if volume and trading increase consistently.   The combination of a rapidly increasing variant combined with the Fed’s possible price hike is causing an advent effect on bitcoin, however, many investors are bullish for the long term.

Positive Outlook Ahead Of 2022

  Kate Waltman, a crypto specialist accountant claims the leading educators and investors are bullish for Bitcoin in 2022. Waltman states that the market’s biggest educators are predicting a $100K price for Bitcoin, that could be fulfilled as early as Q1 of 2022.   Jurrien Timmer, the director of global macro at Fidelity Investments, quotes that investors can expect a “pretty sustainable” rise in Bitcoin’s price that is facilitated by organic market movement.   What’s important to note is that Bitcoin’s price can move either way, due to the volatility involved. As an investor, you should take the help of your financial advisor and properly examine the risks to decide your investment decisions. Only invest what you can afford to lose, that way you can maximize your profits and benefit from the beautiful world of cryptocurrencies.  

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