BTC to Drop to Around 20,000 or below in 2022

In the three months between 22 October 2021 and 22 January 2022 Bitcoin crashed over 52 per cent in price. Many would consider it alarming if the stock market had a fall of this magnitude over such a short period of time, yet while some were concerned by such a large fall on Bitcoin the majority pretty much ignored it and were treating it as an opportunity to buy more Bitcoin at a cheaper price. But is this really wise?

Bitcoin is showing signs of weakness

Due to the significant rise of Bitcoin over the last decade, many are treating it as something that just continues to rise and while this was somewhat true in the earlier days of Bitcoin, it is now not the case anymore. In the 24 days following the low on 22 January, Bitcoin rose over 40 per cent in price because many jumped in hoping to grab a bargain. However, they may have jumped in too early given that over the last few weeks it has fallen nearly 20 per cent in price. Given this, anyone who bought into Bitcoin in recent times or who has been holding it since January 2021 has either lost money or is barely breaking even.

From a technical perspective, Bitcoin is showing signs of further falls and I believe it will not be long before it breaks below the low at 29,455 in July 2021. In fact, there is a good probability that Bitcoin will fall to around 20,000 or below. If this occurs, it means a fall of 45 per cent from its current levels and around 70 per cent from its all-time high. So, buying into the recent dip could be an expensive exercise for those who jumped into Bitcoin hoping it would rise strongly.

The challenge with buying any assets when they dip is knowing whether the dip is just a short term down move, a more sustained correction or a crash like Bitcoin is experiencing, which as I mentioned is likely to continue. Too many times, I have seen traders buying in the dip only for them to be left bewildered as they watch their investment fall away considerably. Right now, the best thing to do with Bitcoin is to sit back and wait for the right time to enter. Those who are patient will be handsomely rewarded when it eventually stops falling and starts to rise.

What were the best and worst performing sectors last week?

The best performing sectors included Consumer Staples up 3.39 per cent followed by Utilities up 1.67 per cent and Energy up 0.72 per cent. The worst performing sectors included Consumer Discretionary down 6.09 per cent followed by Materials down 4.59 per cent and Financials down 4.31 per cent.

The best performers in the S&P/ASX top 100 stocks included Cochlear up 13.30 per cent followed by Endeavour Group up 8.14 per cent and Lynas Rare Earths up 7.29 per cent. The worst performing stocks included Domino’s Pizza down 18.93 per cent followed by Magellan Financial Group down 18.06 per cent and IGO down 10.86 per cent.

What's next for the Australian share market? 

The All Ordinaries Index continued to fall away last week ending the week down 3.05 per cent, which caused major concerns for many who have been fearing that the market will crash. These fears only increased in the last week as the world’s stability is under question due what is unfolding in the Ukrainian. However, I would I urge investors and traders not to get caught up in all the chatter about the market.

Currently, the Australian market is down 8.58 per cent since it achieved a new all-time high in January and I believe we can expect further falls. That said, while it is still possible the All Ordinaries Index could fall below 7,000 points, I don’t believe we will have to wait long before the market finds support and starts to rise again. I still don’t believe our market will crash, however, I am prepared to be wrong, which is why I say that we always need to hope for the best and prepare for the worst.

It is during these times that investors and traders get tested and their emotions run high, which causes many to make errors in judgement. Now is the time for a cool head rather than chasing the market or looking to grab a quick bargain. Instead, you should be looking for good stocks at better prices when the market does settle.

As I have said previously, I still believe the Australian market will do well in 2022.

 For now, good luck and good trading. 

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.