The crypto markets have been experiencing major volatility lately, which has been amplified by the recent selloff intensifying the bearish sentiment. Many are wondering: Will the crypto crash get even worse?
To understand where we could be heading, it's important to look at the historical context. $BTC has experienced multiple boom and bust cycles over its relatively short lifetime. However, the magnitude of the price swings has diminished with each cycle as the asset has matured.
$BTC During the last major bull run in 2017, Bitcoin saw multiple corrections in the 30% range before eventually topping out near $20,000. The subsequent bear market took it back under $4,000 by late 2018 - an 80%+ drawdown.
Similarly, in the second half of 2022, Bitcoin experienced a significant crash. The cryptocurrency market was under pressure after the collapse of major exchange FTX. In fact, Bitcoin's price did fall dramatically. After reaching an all-time high of nearly $69,000 in November 2021, Bitcoin's value decreased by around 75%. By the end of December 2022, $BTC was trading at just under $17,000.
In the current cycle, the largest correction so far has been around 23% from the all-time highs near $69,000 set in November 2021. While painful for recent buyers, this volatility is actually relatively tame compared to Bitcoin's historical norms during bull markets.
By overlaying Bitcoin's price action with technical indicators like moving averages and retracement levels, some potential areas of support can be identified in the $52,000 to $56,000 range. A decline into this zone would represent a 30-35% correction from the highs - still within the expected parameters of a normal bull cycle correction.
However, a sustained break below this area could indicate something more ominous is at play. Several analysts have called for a potential decline to the $40,000 level in that event, which would align with the 50% retracement from the 2021 peak.
Despite the Federal Reserve's decision to keep the federal funds rate in a range of 5.25% to 5.5%, the same level it has held since the central bank's July 2023 meeting, only time will tell if this proves to be yet another bull market correction, or the start of a deeper downturn in crypto prices. But applying some objective analysis from previous cycles can help crypto traders and investors navigate the turbulence and make more informed decisions.
