Can The Crypto Market Drop Lower?

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Contributor, Benzinga
May 25, 2022
verified by Ryan McNamara

While crypto is known for intense volatility, something has felt different in the markets since the start of 2022. A number of macro factors have hurt both the stock indices as well as crypto markets. As a rush to liquidity intensifies, the state of the market is in question – the multiyear bull run may finally be coming to an end.

Bitcoin (CRYPTO: BTC) is known to have over 75% drawbacks in price. Still, the thought of such a drop is a new and uncomfortable concept for many crypto investors. Is this the beginning of crypto winter, or is it just a short term pullback?

Can Bitcoin Drop Lower Than $20,000?

The crypto market tends to follow the price movement of Bitcoin. With Bitcoin dropping below $30,000, coins like Ethereum (CRYPTO: ETH) and Solana (CRYPTO: SOL) have tanked as well, testing lows of $1,700 and $40, respectively. With all eyes focused on Bitcoin’s price action, the charts have begun to look increasingly worrisome. 

Many believe that Bitcoin and a number of cryptocurrencies tailing it have lost an important level of support, meaning more pain to come. Bitcoin dropping below $20,000 is certainly in the realm of possibilities. However, positive news from the Federal Reserve could also send the market upward; interpretations of Fed Chairman Jerome Powell have shown great impact on the crypto markets. 

Why Is Crypto Going Down?

Many factors weigh on the crypto markets: rising inflation, rate hikes, reduced quantitative easing, investor sentiment, scams and foreign policy, to name a few. Bull runs also must come to an end at some point –– typically they last just a couple of years. As we tread into a third year of a potential bull market, there is a good chance the end of this run has already occurred.

How to Short Crypto Markets

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Some bears are shorting Bitcoin and other cryptocurrencies; this can be done through platforms like FTX and Bybit. However, regulation in the United States could make it difficult to do so. Decentralized exchanges could be another option to short crypto. These exchanges offer leveraged tokens that rise in value when a token falls. Check out Uniswap to explore this option.

Can Bitcoin Still Hit $100,000 in 2022?

It is possible for Bitcoin to see a swift reversal in price movement –– the price target of $100,000 has proved a favorite prediction for those pro Bitcoin. A clear route to a $100,000 Bitcoin would be if it sees more mainstream adoption as a tool to hedge against inflation. 

Up until now, Bitcoin has largely moved in tandem with the Nasdaq Stock Market, in turn, looking more like a high-risk tech investment than a hedge against inflation. If Bitcoin can begin to show signs of being a risk-off asset, the crowd of skeptics will be forced to begin adopting the currency. With inflation at record highs, the average American is paying the price from irresponsible government spending. With gas, groceries and cars at elevated prices — among a long list of other items — consumers are desperate to stop their purchasing power from continued erosion. 

With gold at a roughly $10 trillion market cap, Bitcoin would need to increase 20 times in value to match gold's market cap. Bitcoin, commonly referred to as digital gold, would also be able to reach the hands of a much larger number than that of physical gold, raising the price potential even higher.

Where To Buy Crypto

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If you are looking to buy crypto, a great place to start is Gemini. The trading platform does its due diligence on a large selection of cryptocurrencies and only offers them to be traded after deciding they are safe and properly regulated. If you are looking to dive deeper into Web3 investments and try decentralized finance, non-funtible tokens (NFTs) and decentralized autonomous organizations, then creating a digital wallet would be idea. One good option here is MetaMask.

Will Crypto Keep Crashing?

If Bitcoin does not find support ,it is likely to be the end of this crypto bull run. While many claim to know what crypto prices are going to do, few are actually able to time the market successfully. Your best option, if you are a believer in crypto, is to buy and hold for the long term.

Is Now a Good Time to Buy Crypto?

Generally, low prices are the time to buy in any form of investing. While Bitcoin and other cryptocurrencies may continue to crash, their prices are well off all-time highs. A great strategy to use is dollar cost averaging — buying a predetermined amount of crypto at a certain day each week, month or year. This helps buyers invest without emotion clouding their judgment. It also continues to buy assets when prices are at their lowest, helping you to see increased gains during bull markets.

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