​​Bitcoin Plummets and Nears Lowest Price This Year. Has It Reached Its Bottom?

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  • Bitcoin fell below $35,000 today, taking it close to its January 2022 low.
  • Other cryptocurrencies have also seen significant losses this week as global markets react to economic tightening measures.
  • A long-term perspective can help investors weather dramatic price fluctuations. 

The lead crypto could fall further given the continued economic tightening measures.

Bitcoin (BTC) continued its downward slide over the weekend, slipping below $35,000 for the third time this year. The leading crypto is now very close to its January 2022 low of $33,184, according to CoinMarketCap data. This morning BTC touched $34,380, and crypto investors are braced for further losses.

Crypto sentiment reflects extreme fear

The Crypto Fear & Greed Index is flashing "extreme fear" right now. This isn't so surprising given Bitcoin registered a 10% drop last week -- its largest intraday fall since January. The index tracks various indicators, including price volatility, social media activity, and trading volume.

The prices of other top cryptos have also dropped significantly. Ethereum (ETH) is down around 9%, BNB (BNB) is down 7%, and Solana (SOL) is down 12% in the past seven days. The crypto market cap is down from almost $1.8 trillion on May 5 to $1.6 trillion at time of writing. 

Cryptocurrency investors know that volatility is part and parcel of investing in digital assets. Even so, it can be extremely worrying to see the value of your assets drop dramatically. After six months of downward price action, many investors want to know whether the end is in sight.

Has Bitcoin reached its bottom?

Some overly optimistic analysts have been calling the bottom for Bitcoin's price for months. The hope is that Bitcoin will soon rally to new highs as it did twice last year. However, economic tightening measures around the world continue to put pressure on high-risk assets like cryptocurrency in the near term.

During the pandemic, governments and central banks introduced various stimulus measures designed to keep the economy going. Now, authorities are pulling them back in an attempt to get inflation back under control. The ongoing Russia-Ukraine conflict adds additional uncertainty. As a result, we're not in the same climate that pushed crypto prices to extraordinary levels last year and investors should be prepared for further losses.

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Cryptocurrencies are relatively new and untested assets, making it difficult to predict how much lower Bitcoin may fall. However, some analysts are talking about levels of support at $28,000, followed by $20,000. Peter Brandt, the veteran trader who predicted the 2018 crash, recently tweeted that BTC could drop to $28,000. 

Keeping a long-term perspective

However, while we can expect continued choppiness in the short term, for buy-and-hold investors, it's long-term expectations that matter. There are no guarantees about what will happen to crypto, and you need to do your own research before spending your hard-earned cash. But as long as you only invest money you don't need in the short term, you can afford to take a long-term view.

Some well-known investment gurus believe the price will eventually fall to $0, while others predict it could eventually reach $1 million or more. Bitcoin believers hope the crypto king is a form of digital gold or even the future currency of the internet. Bitcoin skeptics say it has no inherent value and this craze will eventually peter out. Before buying Bitcoin, you need to decide how much weight to give to these different perspectives.

Bottom line

Bitcoin may fall further in the short term, especially as countries introduce additional measures to curb inflation. If you bought crypto for the first time last year, you may now be regretting your decision. You may even be tempted to cut your losses and sell. However, if you do this, you will lock in any losses and won't be in a position to benefit if the price rises again.

It can be hard to stick to your guns in the face of severe losses. But investing is a marathon not a sprint. If you avoid panic selling your investments and hold on through these difficult times, you're more likely to profit if Bitcoin does eventually reach the highs that some predict it will.

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