Analysts are weighing in on the possibility that Bitcoin could drop below $20,000, talking about the various factors that could affect its price. BTC is currently in a bear market, with its price around $22,000, a significant drop from its all-time high of almost $69,000.
Treading on a Thin Bearish Line
The $20,000 price line is the focus of attention for Bitcoin investors. It represents the peak of the bull run that Bitcoin experienced in 2017. In previous bear markets, Bitcoin had never fallen below the price reached during the peak of the last bull run. However, in this bear market, Bitcoin is much less far away from reaching that mark.
Sam Callahan, a cryptocurrency analyst at Swan, believes that Bitcoin could drop by over 80% from its all-time high. He said that it could fall as low as $13,800 during this cycle.
Despite the potential impact of a potential bear market on Bitcoin’s long-term value, analyst Brian Callahan isn’t too concerned. He noted that the digital currency’s investor base is more sophisticated than in previous bear markets. He also thinks that if Bitcoin drops below $20,000, there would be a significant buying opportunity.
Yuya Hasegawa, a market analyst for Japanese cryptocurrency exchange Bitbank, said that Bitcoin could fall to around $12,200 during the current bear market. However, she now thinks that the price could recover, stating BTC could go under $20,000 in the short term, but it will bounce back and regain previous levels fast.
Liquidations at Large
Although some financial experts are still optimistic about Bitcoin’s potential recovery, Marcus Sotiriou, an analyst at Global Block, warned that the price could fall below $20,000. He cited various factors such as the controversy surrounding Celsius, the liquidity crisis that affected the company, and the possible insolvency.
According to Sotiriou, Celsius is in trouble due to the large number of bets on both Ethereum and Bitcoin. If these bets face liquidation, this could cause further downside. In addition, many investors fear a liquidation cascade will occur due to the recent margin call on Celsius. Notably, the price of BTC has already dropped to around $17,000.
When investors suddenly close their positions in Bitcoin derivatives products due to insufficient collateral, they are forced to liquidate their positions. In the case of forced selling, the price of Bitcoin can drop further, bringing about more liquidations. Thus, there is a “cascade of liquidations.”
In a Twitter thread yesterday, Arthur Hayes, the former CEO of BitMEX, noted the potential for this type of risk in the crypto derivatives market. According to him, most of the open interest in the market is for Bitcoin and Ethereum. The former at around $20,000 and the latter around $1,000.
According to Hayes, the closer the market gets to these levels, the more traders will need to sell to hedge their positions. He added that if the above mentioned levels break, the market could see a massive sell-off. He warned crypto traders that they might want to close their computers as the lack of technical support would cause them to lose their charts.
What is Next for Investors?
Charles Tan, the chief marketing officer of Atato, a cryptocurrency custodian, believes investors should be cautious due to the rising prices and the potential for inflation to cool down. He noted that investors should also consider their risk appetite when investing.
Despite the various regulations and crackdowns implemented over the past decade, financial experts believe that cryptocurrencies will remain resilient. Even though cryptocurrencies have the potential to deliver high returns, they are still considered risky assets. Therefore, investors should only allocate a portion of their savings to these assets.