Since I can see the fear and pressure some of you are under at this point, I'd like to offer some advice and a bit of analysis of the market. Maybe this will put those of you who are biting their nails and watching the charts all day long at ease. Hodlers probably won't learn anything new here, but I at least hope that those who think the sky is falling will.
Let me start by saying that the things you can read in both the mania and extreme fear are one of a kind. Especially on youtube you can see and see some weird mix of panic, hate, resentment and sarcasm. No, Bitcoin is not going to $1, $100, $1000 or anything in between. The protocol is intact, the hash power is growing, this Bitcoin that people are selling now at a loss below 40k is actually a stronger, better Bitcoin than the one they were buying for 40k in January 2020.
You're probably thinking that if everything is fine then what caused it to crash and why 30k again? There's so many people who feel fooled by media and youtubers. It was supposed to be at 100k, right?
There's so many factors that influence the price that it's impossible to predict the exact value and time. There's external and internal factors, with internals being the number of users, nodes, network upgrades, hash power, difficulty, number of transactions. External factors are things like the stock market, the attitude of various governments, pandemics, wars and so on.
In 2013 it was mostly internal with the biggest exchange declaring bankruptcy, while the March 2020 market crash is a nice example of an external influence (US stock market covid crash)
Unlike the external ones, internal problems cause a prolonged loss of confidence in the asset, so they're much worse.
IMO we are currently facing a bearish correction due to external factors. High inflation all over the world with countries like USA, Turkey, Russia and Poland really struggling to fight it. Most of them try to increase interest rates, which means that companies who are in debt are forced to pay more interest and any future loan is going to cost them more. Naturally this is going to slow them down and make investors (who also have to pay higher interest on their loans) to sell some assets to be able to cover that increase. This is why the stock market is going down and dragging Bitcoin along.
Is it bad overall? Sure, but is it bad for Bitcoin? Not really, because it's still the same Bitcoin, just people don't have enough money to keep buying and since we are mining more every day, with less buyers Bitcoin is naturally going to keep falling in price.
Silver lining? Of course there is one. First of all, the stocks are not going to keep falling forever. The governments know that they can't let this go too far or companies start going bankrupt, which means less taxes and unemployed people on the streets waiting for another round of stimulus checks. They are going to start printing money and lowering rates, which will push the stocks and bitcoin up.
There's also some technicals for those of you who like these things.
The similarity among this price action and other historical events is striking.
We are going through Spring of 2021 all over again. You can see that there's much less volume this time because we've been witnessing an outflow of coins from exchanges all throughout last year.
Why shouldn't you panic?
1. Fear is at extreme levels in both the fear and greed index and on social media. The blood is definitely on the streets.
2. The RSI is at one of its lowest levels in history, around the value where it was in March of 2020. Historically such a low RSI hasn't happened more than once per year and always indicated a good buying opportunity.
3. In the previous cycles we clearly had an overheated top, that was followed by a 50% move to the downside and a dead cat bounce (a lower high followed by a lower low). This time there was no such thing and we've reach the oversold area without even correcting 50%. In the previous cycles the price had to correct 70% or more to become oversold on the RSI.
4. The fundamentals remain the same.
If that's not enough for you, calm down and think about it for a moment. A year ago people were happy to see 30k, now they panic at 35k. We tend to see the negative side of things, despite common sense. If someone gives you $100 and the next day demands $80 back, you'll be reluctant to give it away. All you'll feel is regret that he gave you something and then came back to take it away, completely ignoring the fact that he gave you $20 for free.
Most people can't stand a little bit of pressure and succumb to it. They want for it to stop already, even if it means turning this pressure into regret. When you hold an asset that's 10% down you just want it to stop and go up, but when it goes down another 10% and another, you sell just to be able to get on with your life. That's why bear markets always take longer and go deeper than they should, without any fundamental reason.