BITCOIN: FUNDAMENTAL ANALYSIS AND NEXT TARGET - LONG

7 de dez. de 2022

Bitcoin's bears are advancing with renewed vigor. The digital currency is trading around $16,900, but fears of further complications from the FTX crash, recession, inflation, and geopolitical risks in China could push the rate down to $15,000. Understandably, even the staunchest investors who buy bitcoin on the decline are now worried.

Now $16,900 is a significant pullback from the previous support level of $20,000 that bitcoin maintained over the summer. So far, so good. While you're buying it now, you're still buying on the decline. But now comes the moment of truth: do you buy if the rate falls below $15,000?

Until the FTX incident, $15,500 was considered the worst-case scenario for bitcoin. But then what happened happened, and now there is a new worst-case scenario: $6,000. This would mean a huge 65% drop from current levels and would inevitably lead to more bitcoin bears. It would also lead to a final mass capitulation and runaway investor exit or complete market capitulation.

Previous bitcoin bear markets have required such panic before bitcoin reached its final bottom. In short, the cryptocurrency market must have a moment of such intense pain that even the staunchest bitcoin investor decides to wave the white flag. Most likely, the market needs a final downward move to achieve complete capitulation. Only when bitcoin reaches a final bottom can we expect a new long-term rally.

The good thing about all this is that bitcoin at $6,000 will still be double the bottom of the 2018 bear market. If you buy it at $6,000, you are setting yourself up for a potentially exciting price rise in the coming months.

For example, consider the price projections of California-based crypto hedge fund Pantera Capital. It has set a price target for bitcoin at $149,000, based on its expected performance during the next halving period, scheduled for 2024. According to this model, bitcoin will bottom out by the end of 2022, followed by a gradual recovery in 2023, and a sharp acceleration in growth by 2024. Pantera Capital predicts that the cryptocurrency will hit $36,000 by 2024, and then jump sharply to $149,000.

Of course, that $149,000 price forecast is probably at the upper end of most investors' expectations range. But even if bitcoin retreats only to $20,000, investors who buy that bottom will make incredible profits. This event may not be very likely, but it is definitely in the range of possibility; in mid-June, bitcoin was still trading near the $20,000 mark after the initial market downturn caused by Terra Luna.

There is a popular saying in cryptocurrency circles, "Bear markets are where millionaires are made." That's when regular, everyday investors can buy valuable crypto-assets at the lowest prices. Buying bitcoin at $6,000 and waiting patiently for it to rise in value to $149,000 is the kind of investment that can make you a millionaire.

Yes, it's a very risky investment strategy, especially given the historical volatility of cryptocurrency. And yes, for it to work, you will have to buy and hold it by going through a real experience. The final surrender of the bitcoin market will be head-turning and debilitating. But when that day arrives-when every one of your neighbors says you've gone crazy investing in bitcoin that's when the market will hit an absolute bottom.

Total capitulation in the cryptocurrency market sounds terrible, but it's not terrible. It's just a feature of the system. It helps remove all the selling pressure from the market. Risk-averse investors are being replaced by risk-tolerant and risk-seeking investors, and the market has nowhere to go but up. That's why many remain optimistic about bitcoin. Buy on the downside - and especially on the double dip when the rate drops below $15,000.