Is Bitcoin About to Crash Again?

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Bitcoin has had a strong 2024 so far, with the price hitting a new all-time high of over $70,000 in March.

The launch of a series of Bitcoin exchange-traded funds (ETFs) and their halving in April likely helped propel the original crypto asset higher.

The price has been hovering between $60,000 and $70,000 since then, but will it continue to rise from here or fall back to lower levels?

In this article we explain:

What is happening to the price of Bitcoin?

Since May 2024, the price of Bitcoin has been following a consolidation trend for several weeks. It traded in a range just below $60,000 until peaking around $70,000. The price started the year near $40,000, so current levels remain significantly higher.

A drop from $70,000 to $60,000 in a few days is much more than you would see in the stock market for example, except in the most extreme circumstances like the start of the pandemic.

Learn more: How high could the price of Bitcoin potentially go?

Will Bitcoin crash?

It is impossible to predict the price movement of Bitcoin with certainty. Given the volatility of Bitcoin, it is likely that the price will experience a dramatic fall again at some point in the future, which could be defined as a crash.

It is very difficult to say when this will happen. Although past performance is not an indicator of future results, looking at historical trends, major Bitcoin crashes have not occurred in the year following a halving. In fact, the opposite happened. The price of Bitcoin has increased significantly in the year since the halving.

The price rise seen after previous halvings, however, has not been a smooth and consistent uptrend. From day to day and week to week, the price rose and fell significantly, part of a broad, longer-term uptrend.

Previous crashes occurred more than a year after the last halving. If this pattern repeats itself, a crash would occur in late 2025 or 2026, given that the last halving took place in April 2024. There is, however, no certainty that this pattern will repeat itself. Events could occur that completely invalidate past patterns and investor expectations.

Learn more: Is cryptocurrency an investment worth considering?

Will the price of Bitcoin increase?

It is impossible to know for sure. Proponents expect its price to continue to rise over the long term, while remaining volatile. The introduction of ETFs and the recent halving are probably two of the main reasons why many people think the price will rise.

ETFs provide institutional investors and non-technical individuals with easier access to the asset. Institutions collectively have billions of dollars of wealth to invest, so if just a small fraction of that money were invested in bitcoin over the coming years, it could drive the price significantly higher.

The halving means that the amount of new bitcoins created each day is now half of what it was before April 19. This means that supply is more restricted. Lower supply with equal or increasing demand generally causes prices to rise over time.

What makes bitcoin so volatile?

Bitcoin is volatile for several reasons. First, it is a new type of asset with no inherent value other than what bitcoin investors are willing to pay for it, making it more difficult to value. It was only invented in 2009, in the aftermath of the global financial crisis. Although 15 years may be a considerable amount of time for an individual, it is very little compared to the life span of other investment assets, such as stocks and gold.

Liquidity can be another factor in volatility. The fewer assets available for purchase and sale on exchanges, the more volatile its price generally is. Even though the liquidity of bitcoin on exchanges is much higher than it was in the early years, it remains less liquid than traditional assets like stocks of large companies.

Another big reason for volatility is regulatory uncertainty. Although this has eased to some extent with the approval of Bitcoin ETFs, the regulatory framework for Bitcoin and crypto in general remains unclear.

Learn more: What are ETFs and are they a good investment?

What Caused Bitcoin’s Last Big Crash in 2022?

As of March 2022, the price of one bitcoin is around $46,000. But the market turmoil that followed saw that figure fall by almost two-thirds.

In June 2022, bitcoin fell below $20,000 for the first time since 2020. This was driven in part by the decision of Celsius Network, a major American cryptocurrency lending company, to freeze withdrawals and transfers, citing “extreme” conditions. There have also been other crypto-related collapses, including crypto asset Luna and a crypto hedge fund called Three Arrows Capital. This helped fuel the crisis in the cryptocurrency market.

However, the biggest blow to crypto in 2022 was likely triggered by the collapse of FTX in November. It was a major cryptocurrency exchange that processed approximately $1 billion in transactions every day. Its collapse impacted other crypto exchanges. In November 2022, the price of bitcoin fell to around $16,000, a far cry from the high of around $65,000 a year before.

Learn more: Should you invest in European stocks?

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