Bitcoin: The Bottom is Near (Cryptocurrency: BTC-USD)

Bitcoin (BTC-USD) had an epic decline after reaching a peak of around $64,000 around a year ago. The fall from top to bottom has been enormous, corresponds to approximately 76%. Many other digital assets have been brutalized during this bear market phase, in decline with 90% or more during the last route. Bitcoin got ahead of itself, and when the Fed started to tighten, Bitcoin started to deflate. Also, Bitcoin may drop down soon, reaching my long-term buy-in target of $10-12K. However, Bitcoin is far from worthless and the crypto segment is still alive. We have a huge market for Bitcoin and other functional and transactional digital assets. While sentiment is bad now, confidence should return to the cryptocurrency market and Bitcoin’s price should increase significantly in the coming years.

Bitcoin 3 Year Chart

After posting a major double top in 2021, Bitcoin’s price returned to pre-breakout levels in 2020. The run up in 2021 was phenomenal, but the crash in 2022 has been epic. So, what’s next for Bitcoin? We can expect a similar phenomenon we have seen in previous cycles. While sentiment remains poor, we may see more downside in the near term. However, as sentiment improves, price action should stabilize and Bitcoin could advance much higher in the coming years.

Previous cycles set to repeat

BTC: Long term chart

We have seen several major Bitcoin peaks over the past decade. In late 2013, Bitcoin peaked at around $1,200. This initial peak was followed by an 85% decline that dropped BTC’s price to approximately $200. The next prominent peak occurred in late 2017 at around $19,500. This peak was followed by an 82% decline that dropped BTC to approximately $3,500 before the subsequent recovery and bull market began. Bitcoin already hit a low of around $15,000 in this bear market, and a decline to the $10-12K range would equate to a traditional bear market decline of 80-85% for Bitcoin. Therefore, $10,000-12,000 may be the ideal buy-in point for Bitcoin, but even around current levels, Bitcoin is a good buy as the price is likely to move much higher in the coming years.

Bitcoin: Not Alone – Other Cryptocurrency Performance

While Bitcoin’s dominance is nowhere near its pre-2017 levels, its market capitalization still accounts for roughly 38% of the entire cryptocurrency complex. Moreover, if we consider Ethereum’s (ETH-USD) 18% share, the top two holdings account for roughly 56% of the $820 billion market cap of 22,000 cryptoassets. There are many assets in the crypto space, and many “coins” have significant functionality potential. We see many promising projects developing and trading on more than 5,000 exchanges. Therefore, the digital asset market is alive and well. While going through a mild decline, Bitcoin and other top digital assets should recover and improve significantly in the coming years.

Top Coins: Decline from bottom to top

• Bitcoin: 76%
• Ethereum: 78%
• Litecoin (LTC-USD): 87%
• Solana (SOL-USD): 95%
• ChainLink (LINK-USD): 88%
• Bitcoin Cash (BCH-USD): 93%
• ZCash USD (ZEC-USD): 88%

The takeaway

We have seen 75-95% decline from 2021 highs in most major cryptocurrencies. Therefore, it is highly likely that the short-term downside is now limited. Furthermore, as the market stabilizes and sentiment improves, significantly higher prices are likely to materialize in the years ahead.

Considerable future potential

You may be surprised at how many large companies now accepting Bitcoin and other cryptocurrencies. Some of the most important companies include Microsoft, PayPal, Whole Foods, Overstock, Starbucks and many more. Bitcoin and other transactional coins are still in the early stages of the adoption cycle. The trajectory to mass adoption should drive prices significantly higher as the industry continues to expand and evolve. From November 2022, approx 85 million people created unique Bitcoin wallets on Blockchain.com. There are approximately 6 million users more than a year earlier and approximately 42 million more users than in 2019 (a 102% increase).

The bottom line

Despite the temporary slowdown and subsequent bear market phase, Bitcoin is a valuable asset. I don’t need to remind most readers that Bitcoin has a fixed supply of only 21 million. About 92% of all Bitcoins have already been mined. Therefore, we are dealing with an asset with minimal supply, but demand can expand exponentially, leading to dramatically higher prices in the years ahead. The digital asset segment experienced a significant downside in this bear market. Although the ultimate bottom may not have been reached, we have come very close. Improved sentiment, increased popularity, higher adoption, limited supply, increased demand, historical trends, speculation and other macroeconomic elements should drive Bitcoin’s price significantly higher in the years ahead. My long-term buy range remains $10-12K for Bitcoin, with a price target of $100-150K in the next bull market phase.

Bitcoin risks

Bitcoin is still a volatile asset and not suitable for everyone. Numerous factors such as increased government regulation, hacking, functionality issues (such as speed, cost and scale), fraudulent activity and other harmful elements can negatively affect Bitcoin’s popularity/sentiment and affect its price.

Therefore, for investors with a low to mild risk tolerance, a position size of 3-5% of the total portfolio holdings may be appropriate. A position size of 10% of the portfolio holdings may be suitable for investors with a higher risk tolerance.

It remains to be seen what the future of Bitcoin will be. The digital asset may be worth much more than it is now several years later, or it may be worth less if harmful elements prevail in the long run.