FTX and FTX.US collapsed in the final months of 2022, causing bitcoin – and the larger crypto market – to fall. The two exchanges filed for Bitcoin bankruptcy on November 11, 2022. As FTX invested in many cryptocurrencies and crypto-related companies, its collapse rippled throughout the industry.
Bitcoin price history says that it has rebounded after crashes before also, but it has taken months or years.
Although Bitcoin has recovered all of its post-FTX crash losses by mid-January 2023, its volatility remains high, and its fallout continues.
The crypto exchange BlockFi, which had received a line of credit from FTX.US and was about to be acquired by it, filed for bankruptcy on November 28. Furthermore, Gemini is still trying to recover assets frozen since November 2022 in its Gemini Earn program.
Table of Contents
How Can Bitcoin rise in general?
The scope of a crash is much smaller than was initially thought. Due to the financial interconnectivity between so many crypto-related companies, a crypto-related exchange crash can trigger a domino effect that affects other companies and currencies. The price of the speculative asset may rise if investors once again pile into the asset once the dust settles following the collapse of the FTX. A new revelation regarding the FTX collapse, or a similar incident on another popular exchange, may limit the growth of prices.
There is a drop in interest rates, and lower interest rates tend to make riskier investments more expensive. Currently, the Federal Reserve is raising the federal funds rate, which has been higher for over 10 years, to beat inflation. Despite that, Silicon Valley Bank’s sudden collapse on March 10, 2023, cast doubt on the Fed’s ability to raise rates aggressively.
Inflation and recession threats are down. Bitcoin might become more popular if the Federal Reserve manages to reduce inflation by hiking interest rates. Investing in crypto by big investors (like pension funds). Large purchases can raise the price.
The Collapse of Silicon Valley Bank:
The price of Bitcoin jumped from around $20,000 to over $24,000 after Silicon Valley Bank collapsed.
Why?
According to Bitcoin enthusiasts, this is precisely what Bitcoin was created to solve. Depositors of SVB could have kept complete control of their money if they had put their funds in Bitcoin. With Bitcoin’s price surge, a lot of bulls believe Bitcoin will solve traditional finance problems. As investors pile in, the price might go up.
Price Predictions for Bitcoin: All over the place
It is common to use Bitcoin as a proxy for the price of other cryptocurrencies since it is the oldest and most valuable of all. The future direction of Bitcoin’s price is, therefore, much speculated about.
You can find a lot of crypto predictions on crypto blogs, Twitter accounts, and YouTube channels. It is rare to see professional analysts set price targets, and it is just too hard – J.P. Morgan reported Bitcoin’s volatility was five times higher than gold or equity markets in 2021.
It is not a question of if but when cryptocurrency prices will rise again, say those who believe in its potential. You can define “when” in many ways. The Bitcoin price may return furiously, like in 2021, or it may take a while after the 2013 crash.
There is also a chance prices will continue to fall. As the crypto winter ended, bad news dampened hopes, including the sudden collapses of FTX and FTX.US. It is possible prices will drop again after the turmoil of late-2022, even though they started strong in 2023.
Managing a Crypto Downturn:
According to Greg King, founder, and CEO of Osprey Funds, a crypto investment firm, “crypto volatility can benefit savvy investors in some ways.” It can help investors take advantage of dips, harvest tax losses, and average costs.
Anyone can use the strategies King mentioned. Buying the dip means believing the price will rise again eventually if you view price slides as opportunities. A tax-loss harvesting strategy involves selling off investments for a loss, while dollar-cost averaging involves investing regularly at regular intervals.
The key to investing in crypto in a down market is to formulate a plan, execute it and stick to it over time.
