Bitcoin has done well since 2011. It went parabolic for many people in 2017. Then it had another swing up in 2020. Of course, quite a few asset classes went up in 2020 after government stimulus.
Remember that bitcoin hit a low of $5,000 on March 13th, it would then bounce back to $11,000 by August then to $23,000 by December 2020. But it would rise further from there to hit a high of around $61,000 in March 2021.
It would fall down to $35,000 in June 2021 before rising to $64,000 by November 2021.
. Now, the question is, can bitcoin continue to stay strong or will it fall further like other high flying names such as Block, Rivian, Microstrategy, and other similar names in stocks? Again, it is tricky to get this right. Let’s look at some factors.
The Great Decline in Bitcoin and other Asset Classes
There are many different reasons for fear in the market at the present moment.
We are aware of the many different cases of Omicron and how that is having an impact on different countries. For instance, we know that some countries have chosen to become more strict in how they implement their COVID containment policies.
Whether it is locking the country down or select portions of it down, these different policy decisions can have a negative impact on the economy and morale.
These fears can spill over into the market and detract from bitcoin if more people see it as a risk.
Federal Reserve Policies
The Federal Reserve continues to state that it will conduct less market intervention. They continue to state they will taper and raise interests. This is a problem because if more people are invested in the stock market and see that their precious stocks are falling, they may sell other assets that could be even riskier, like bitcoin. Why must the Federal Reserve raise interest rates and conduct this reversal in monetary policy?
The larger money supply due to the stimulus encouraged assets all over the board to go up without rhyme or reason. Now, these assets are falling down, they haven’t come back to reality just yet but they are headed in that direction. At the same time, the cost of goods have gone up.
We are also seeing an increase in wages. While this wage increase may be lower than the current levels of inflation, it is necessary to note that a higher cost of living is not palatable for a large majority of the voting population.
No Specific Bitcoin Catalysts
A few people note that a bitcoin halving may be seen as a catalyst for price increases. We will not have one of these events this year.
This Will Be a Wild Year
This is certainly going to be another wild year because of these different factors. If you are averse to risk, then you see that its not as pleasant to be in risk assets like Coinbase stock, Microstrategy stock, or bitcoin.
We know that the Federal Reserve will move slowly so as not to make any major mistakes that could create significant problems. At the same time, there’s quite a bit of factors to account for this year that could make the Federal Reserve accelerate its programs and impact the markets to minimize further issues with the cost of living.
If you are looking to buy it for the long-term, it could be a good idea. According to Goldman Sachs, on its current path, Bitcoin could easily be well over $100,000……in five years.