Bitcoin price bottom could come after ‘final washout’
Analysis of the cryptocurrency market hints at a fifth and final drop this cycle before the bear market ends
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Your support makes all the difference.The price of bitcoin could experience one more major crash before it sees a significant recovery, according to new analysis.
The cryptocurrency is already down more than 70 per cent from the all-time high it experienced last November and is currently trading at around $20,000 on Wednesday.
Crypto market analysts at financial research firm Fundstrat predicted that a final “washout” could push bitcoin’s price as low as $13,000 before conditions became favourable for a recovery.
This would take bitcoin’s total losses to just above 80 per cent from its 2021 price high, which is similar to downturns following previous peaks in 2013 and 2017. Another drop would also equal the five leg decline seen in those cycles.
“Most short-term technicals point to an above-average chance of a final ‘washout’-style decline before this bottom,” wrote Fundstrat technical strategist Mark Newton in a research note on Tuesday.
“The initial warning should occur on a daily close under $20,491, while under $19,744 allows for a pullback to test $17,592. Technically not much lies under $17,592 before $12,500 to $13,000, which I expect should be an excellent place for intermediate-term buyers to add to longs.”
Bitcoin’s downward price trend over the last seven months was compounded last month by the collapse of the Terra LUNA and UST tokens, which wiped more than $40 billion from investors’ holdings virtually overnight.
Some market commentators have warned that it may not be the last casualty of this downturn, with several other decentralised finance projects also suffering severe losses in recent months.
Which direction bitcoin goes from here could depend on how well the crypto space holds up during one of the worst bear markets in its history, as well as its resilience to macroeconomic factors and geopolitical developments unrelated to the cryptocurrency industry.
“As any seasoned investor knows, calling tops or bottoms in trading is a fool’s errand,” Dr Martin Hiesboeck, head of blockchain and research at the crypto platform Uphold, told The Independent.
“What we do know is that bitcoin has given up all its gains since the last run and is resting at a crucial level... The war in Ukraine, supply chain gluts, and the spectre of inflation are by far the biggest worries. So far bitcoin hasn’t exactly proven to be the inflation-proof Safe haven it’s biggest fans believed it to be.”
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