Could the price of Bitcoin fall again?

Bitcoin (BTC) is the world’s most popular cryptocurrency. It has been through many boom and bust cycles, including the current bear (negative) territory. Many wonder if another BTC crash is imminent; this article will tackle the question.

What’s Happening To BTC Price?

Bitcoin is very volatile. It rises and falls sharply within days, and you’ll be forgiven for worrying about its future trajectory.

BTC reached an all-time high of $68,500 in November 2021, a period of unprecedented boom in the crypto markets. Many other tokens also reached record levels in this period, but the market crashed shortly after in 2022. 

BTC began 2022 at over $40,000 but ended the year at below $17,000, a nearly 60% drop. It has recovered gradually in 2023, trading for around $27,000, over 50% above its level in this year’s beginning. Yet, it’s still far below its 2021 peak level.

Why Is BTC Falling?

There’s no single factor to point at that’s causing the BTC price drop. Instead, it’s a convolution of factors, including:

Interest Rate Hikes

Global central banks have hiked interest rates to tame inflation after a period of relative excess. The U.S. Federal Reserve, chaired by Jerome Powell, hiked interest rates from 0.25% in March 2022 to 5.25% in October 2023. The European Central Bank has also followed, hiking rates from -0.5% in June 2022 to 4% as of October 2023.

Interest rates and Bitcoin have a seemingly inverse relationship. As interest rates increase, investors become more comfortable with treasury bills and less comfortable with alternative assets like stocks and cryptocurrencies. The recent interest rate hikes by the two biggest central banks have dampened interest in BTC and other digital tokens.

Stricter Regulations

Governments are increasingly clamping down on cryptocurrencies, sometimes for good reasons. Recent years have witnessed the failures of several big cryptocurrency exchanges, causing customers to lose deposits. FTX is the biggest case, with the founder currently facing trial for stealing billions of dollars from customers.

The crypto industry needs regulations to survive in the mainstream, sure. But sometimes, governments go too far, like the Chinese government outrightly banning cryptocurrencies in 2021.

As governments clamp down on cryptocurrency transactions, mainstream investors become less willing to dip their hands into the sector, meaning less demand for Bitcoin. 

Lower Economic Output

Economic output has slowed in many countries, partly because of the surge in energy prices seen in 2022. The World Bank has warned of a “lost decade,” wherein global gross domestic product (GDP) growth is expected to decline by 2.2% between 2022 and 2030. Lower economic growth means less money for retail and institutional investors to put into BTC. 

Could Bitcoin’s Price Fall Again?

Bitcoin could definitely fall further. It won’t be the first time it has dropped double-digit percentages within a short period. For example, it traded at around $46,000 in March 2022 but fell below $20,000 by June. If market conditions remain frail, BTC could drop from its current $27,000 level to much less than $20,000 or even $10,000.

Bitcoin is the world’s biggest cryptocurrency by market capitalization. Its trajectory greatly affects the crypto markets, such that a Bitcoin drop also causes a corresponding drop in many other tokens. Yet, don’t be too negative. Bitcoin can still increase in value, especially if the global economy strengthens and interest rates get lowered.

BTC is the primary digital currency that every investor in the crypto industry should keep their eyes on.