After weeks upon weeks of new all-time highs, it seems the Bitcoin rally may have finally come to an end–at least, for now.
Indeed, at press time, the price of Bitcoin was down roughly 20 percent, sitting around $33,800 and poised for further drops. The drop follows a peak of roughly $41,670 on Friday.
The #Bitcoin price during this dip is higher than the Bitcoin price throughout all of 2020.
— Lina Seiche (@LinaSeiche) January 4, 2021
It’s unclear exactly how low the dip will go. However, as long as Bitcoin maintains levels over $29,500, it will still cost more than it did throughout the entire year of 2020.
What’s causing the dip?
Is Bitcoin’s big rally finally over?
Cracks in the Bitcoin rally that has gripped markets for weeks started to show as early as last Monday.
After hitting a new all-time high just over $34,000 on Sunday, January 3rd, the price of Bitcoin sunk to approximately $30,900 within 24 hours. a decline of nearly 10.6 percent. While some analysts are saying that markets will shrug it off, others seem to believe that the end of the current Bitcoin rally is nigh (or indeed, that it is already here.)
Today’s price drop followed a similar pattern: after reaching a new all-time high, the price of Bitcoin shed some extra weight. While last week’s price drop occurred within 24 hours of the new all-time high, this drop has been spread out over several days.
In both cases, the reason for the drop could be similar: as Bitcoin climbs higher and higher, buyers seem to be “playing chicken” with each other. In other words, it seems that buyers have been waiting to see how high Bitcoin can climb before a meaningful sell-off begins–a game of “who can hodl the longest” before losing profits.
However, it seems that the time may have finally come.
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A number of analysts believe that a dip like this is par for the course–and in fact, that it’s been expected for a while.
In December, Joaquim Matinero Tor, a cryptocurrency observer and Blockchain Associate at Roca Junyent, told Finance Magnates that he expects Bitcoin to see a serious drop in the month of January.
Specifically, “I think the price of Bitcoin will fall under 18,000 dollars and then rise back. Whale investors will sell once the financial year is over. So, January may be a rollercoaster ride for the cryptocurrency market,” he told Finance Magnates.
Is now a good time to buy Bitcoin?
Even if the Bitcoin dip does crack below its yearly lows so far, sentiment seems strong that Bitcoin’s long-term rally is far from over. Analyst Lark Davis wrote on Twitter that “While this dip could get worse, in all likelihood #bitcoin will hit $50,000 in the coming weeks.”
While this dip could get worse, in all likelihood #bitcoin will hit $50,000 in the coming weeks.
— Lark Davis (@TheCryptoLark) January 11, 2021
This is a view that seems to be shared by Bitcoin bulls across Crypto Twitter–which is why cries of “Buy the dip!” are resounding through the virtual halls.
However, just as difficult as the art of selling Bitcoin at the right time can be, buying BTC at the right time can be even more difficult. During Bitcoin’s rally last week, Rubix Chief Executive Andrew Hamilton told Finance Magnates, “the best time to buy [Bitcoin] is always yesterday.”
(Although, if Bitcoin was over $41,000 yesterday and $34,000 today, you may have been better served to wait.)
Joaquim Matinero Tor previously told Finance Magnates that he believes Bitcoin could fall as low as $18,000 before making significant movement upward.
“I think the price of Bitcoin will fall under 18,000 dollars and then rise back,” he said. “Whale investors will sell once the financial year is over. So, January may be a rollercoaster ride for the cryptocurrency market.”
At the same time, though, it might be wise not to wait too long–Ramp Capital pointed out on Twitter last week that that “Bitcoin would have to drop 50% from here just to get back $16,500 — the level hit on Thanksgiving 2020.” Now, since Bitcoin has risen even further, the drop would have to be worth more than 50%.
However, this isn’t entirely impossible, or even unlikely–Bitcoin has previously lost more than half of its value on multiple occasions.