Bitcoin (CRYPTO:BTC): Could it Crash to $10,000 in 2022?

Despite Bitcoin’s recovery above US$40,000, analysts don’t rule out a crypto market crash due to macro factors affecting risky assets.

cryptocurrency, crypto, blockcahin

Image source: Getty Images

The trading volume of Bitcoin (CRYPTO:BTC) in the last two trading days was more than double compared to April 23, 2022. Its price zoomed past US$40,000 once more, although some crypto analysts remain cautious about a possible correction.

In mid-April 2022, Antoni Trenchev predicted that BTC could hit US$100,000 in 12 months. However, the CEO of crypto lending firm Nexo acknowledged that the short-term prospects aren’t good. He said the world’s top cryptocurrency may fall along with traditional financial markets, as the massive monetary stimulus programs ends.

As of this writing, the crypto is down 12.2% year to date. Also, the price is 39.8% lower than its all-time high of US$67,566.83 posted on November 8, 2021. Because Bitcoin is notoriously volatile, could it sink to US$10,000 this year in a worst-case scenario?

Vulnerable to a market crash

The global phenomenon that is cryptocurrency is still in its evolving state, so it’s natural for investors to expect sharp drops after spikes. Daniel Khoo, a research analyst at Nansen, said, “Recent volatility has been driven by factors such as inflation, the Ukraine crisis as well as contractionary monetary policies … This has affected not only the stock market but also the crypto market, which seems to follow in tandem recently.”

The S&P/TSX Composite Index remains in record territory, despite the recent pullback, while the crypto market lost in 2.13% to start the week. According to coinmarketcap, the total market value went down to US$1.81 trillion.

On April 25, 2022, the prices of nearly all altcoins plummeted. Ripple (-3.98%), Solana (-3.67%), and Ethereum (-2.99%) were among those that suffered the most percentage declines. It seems that the cryptocurrencies are more vulnerable to a market crash than stocks.

Risk-off investment

Khoo warned that if people go risk-off on volatile assets soon, the short-term negative sentiment could cause Bitcoin’s price to fall. Whalemap believes the current correction isn’t over in that a “generational bottom” is on the horizon. However, the on-chain data firm said its chart shows that buying on these events tend to be very profitable for investors.

For Goldman Sachs analysts, the actions of the U.S. Federal Reserve will have a strong effect on cryptos. They said, “These assets will not be immune to macroeconomic forces, including central bank monetary tightening.” Some critics even liken BTC to technology stocks. Its price action also suggests that it’s not an inflation-fighting store of value.

Coindesk’s George Kaloudis argued, “While Bitcoin’s hard money properties make it a risk-off asset for its supporters, investors see a risk-on asset because of its volatility and technology-like asymmetric price upside.” He added that investors cutting risk will sell stocks together with BTC.

Kaloudis thinks that Bitcoin isn’t a risk-off or risk-on asset yet. He’d like to call the crypto “risk everything” instead. For now, take the cue from Fed Chairman Jerome Powell. His stance is that if inflation remains elevated and the Russia-Ukraine war doesn’t end soon, 2022 could be a shaky year for risky assets like Bitcoin.

Significant plunge

If a crypto market crash is inevitable, Bitcoin needs to plunge 75.4% to hit US$10,000. However, it looks improbable, as the last time the crypto traded at that level was on October 8, 2020. If you don’t want to lose money, just avoid BTC.   

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin, Ethereum, and Solana. The Motley Fool recommends Goldman Sachs.

More on Investing

investment research
Dividend Stocks

Best Stock to Buy Right Now: TD Bank vs Manulife Financial?

TD and Manulife can both be interesting stock picks for today, depending on your investment style.

Read more »

A worker gives a business presentation.
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These stocks are out of favour but could deliver nice returns over the coming years.

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 5.5 Percent Dividend Stock Pays Cash Every Month

This defensive retail REIT could be your ticket to high monthly income.

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $600 Per Month?

Do you want passive income coming in every single month? Here's how to make it and a top dividend ETF…

Read more »

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

ways to boost income
Investing

Are Telus and BCE Stocks a Smart Buy for Canadian Investors?

Telus (TSX:T) and BCE (TSX:BCE) have massive dividend yields, but their shares have been quite sluggish!

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »