There's a lot of fear in the market right now, and it's causing many people to wonder if we're actually still in a bull cycle, or if we've entered a bear cycle that we won't be able to escape for several years. Is this just a great buying opportunity and we'll see the price spike back up later, or is it time to pack up and declare the bull market over.
Let's talk about it.
As I mentioned above, there is a lot of fear in the market right now, and rightfully so. There is a lot going on in the macro landscape. Just like the summer of 2021, which continued to see FUD after FUD announced, which would drive down the price of Bitcoin until it eventually hit a low of $28,000, until each and every one bounced back and broke through way back up to new everything -high price for the time at $69k.
We're seeing the same onslaught of bad news this time around. The difference this time is that these FUD messages are not just focused on Bitcoin or the cryptocurrency market, but on the macro markets and the world at large.
The first thing that has been constant in the recent price drop is the whole Covid situation. Every time there is a new string of Covid that is discovered and spread around the world; it causes the markets to panic every time. Omicron started spreading almost exactly at the same time that Bitcoin was in its Bitcoin. Over the past year, after the panic cooled down, Bitcoin started moving up again. But every time there is a new tension, the price of BTC suffers.
Then there's the whole inflation and interest rate thing. The world is watching what the US will do as it is the largest financial sector in the world and also controls the dollar, the world's reserve currency. Inflation is out of control in the US due to the excessive money printing that happened during Covid. And now they're trying to fix that by cutting the government's spending budget and also by raising interest rates. The later again spooked the financial markets and there are fears that it could not only send Bitcoin into a bear market, but could push the US and even the world into recession.
Finally, lately there has been panic about the situation that is happening between Russia, Ukraine and how the rest of the world will react. It makes people fear that a world war is possible. While I won't go into depth on this topic, it is something that could have an absolutely huge impact on not only the Bitcoin markets, but all markets. We should all pay extremely close attention to this situation.
All of these things, along with traders using too much leverage, panicking retail buyers and selling, caused the price of Bitcoin to fall to $32,000. Which was almost a 54% drop in price from the all-time high price. It has since gone back up to $37k, but the question is, is this a short-term bounce or will things start to look better?
Looking at the chart above, where do you think we fall in it at this point in the cycle?
As always, I remain very bullish on the future of Bitcoin. The price movement today, tomorrow or even next month doesn't bother me much. I'm more concerned about the price in a year or 5 years. There were 3 reasons I posted above for the current downward movement in Bitcoin price. The first two; covid and inflation are two things bitcoin can gain against. It's just a matter of surviving the initial shock announcement that sends the market into a panic. One of Bitcoin's greatest strengths is how liquid it is. But during these moments of panic that also makes it most vulnerable to sell-offs. Many of these announcements occur while other markets are closed at night or over the weekend. Therefore, the only thing that can be sold is cryptocurrency, and people will sell it like hot cakes.
This is why Bitcoin often sees a sell-off that happens before the stock market and is often larger. But it often recovers faster. Consider the covid price crash in March 2020. Bitcoin crashed before the stock market and also saw its price start to recover days before the stock market saw its own march to recovery. The same will happen in this situation.
If either of these situations occur, I believe we are in a bull cycle and will head for new all-time highs sooner than you might expect.
However, if this third possible situation with Russia happens, all markets will turn ugly. Which I believe will send us into a bear cycle. Who knows if this situation will actually happen, but it's something we should all keep a close eye on.
As you can see, the market is still in fear. Although it is slightly better after the price spike that happened yesterday. If you pay attention to Crypto Twitter, it has become a timeline of people being incredibly bearish and losing a lot of money or hope.
While it may sound like a promotional offer to many, it could actually mean that we are close to a price bottom or have already reached it. Often when everyone feels that the market is lost, we will definitely go down when in fact we are doing the opposite. This is actually the best time to buy bitcoins and build your portfolio. When Bitcoin was in the $60,000 range, we would all be excited to have another chance to buy in the $30,000 range. The funny thing is, once it finally happens, people get scared and lose their conviction . This makes them sit on the sidelines just to watch the price go up before they buy.
“Be greedy when others are afraid. Be fearful when others are greedy.” This Warren Buffett quote is truly the golden rule to follow while investing. The key is to first find an amazing asset that you trust. Once you find it, never stop accumulating, even during downturns. Always remember to only invest what you can afford to lose.
One thing is certain. Some days this market can make you feel euphoric, some days it can make you feel depressed, and then there are many days where nothing happens price-wise. But I'm enjoying every minute of it. It is such an exciting market with so much to do, see and learn. With new things happening every day. If you invest correctly today, you will have set yourself up very well for the future.
What about you? Do you think Bitcoin is still in a bull market or have we entered a bear market?