Bitcoin at $ 30,000: will the cryptocurrency fall further and how to make money on it?

 

Bitcoin at $ 30,000: will the cryptocurrency fall further and how to make money on it?

September 29, 2021,15:00

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The situation in financial markets, especially in the so-called risky asset markets, which include the stock, commodity and cryptocurrency market, depends on what is happening in the global economy. When the economy is stable and all is well, investors invest in both risky assets to generate income, and in risk-free assets so that free capital does not lie idle, but does not suffer from inflation. Risk-free assets include government or corporate bonds, as well as bank deposits. In quiet times, the inflation rate is usually at an acceptable level, which is quite capable of covering interest on deposits and bonds.

In crisis and post-crisis periods – for example, now – the inflation rate is higher than usual, and therefore deposits and bonds cannot cover it. Accordingly, investors tend to give capital to where the potential income covers inflation and allows you to earn something from above, that is, in risky assets: stocks, cryptocurrencies, etc.

During a crisis, only the Central Bank of the state is able to stabilize the situation and support the economy. For this, various instruments of monetary and fiscal policy are used: lower interest rates on loans, the QE (quantitative easing) program, tax breaks and reliefs, payments to the population and other incentives. The people call the soft monetary policy the inclusion of the “printing press”. There is more money in circulation, as a result of which the currency depreciates / inflation rises.

To prevent dire consequences for the economy due to the pandemic, the world’s leading central banks turned on the “printing press” at full capacity, on an unprecedented scale. Most of the “new money” was spent by investors and ordinary citizens to buy stocks, cryptocurrencies and other assets in order to protect them from inflation and make money.

On September 22, a meeting of the US Federal Reserve was held, at which it was announced plans to start tightening monetary policy starting in November 2021: cutting the QE program and emergency stimulus, as well as raising interest rates on loans in 2022. The tightening of monetary policy in the coming years will lead to a rise in the dollar’s value, a decrease in inflation and an increase in bond and deposit yields. In anticipation of this announcement, investors began to partially get rid of risky assets and move to risk-free ones. It was against the backdrop of expectations for a tightening of monetary policy that the markets of risky assets, including cryptocurrencies, fell, since all the capital earned during the soft monetary policy on risky assets can gradually begin to be transferred into risk-free assets and thus saved.

Could BTC Fall to $ 30K and Below?

The fact is that statements about plans to tighten monetary policy does not mean that it will really start to tighten in November. It depends on the unemployment rate, inflation rate, as well as the dynamics of economic recovery in general. If the situation continues to improve, then they will tighten, if the situation remains the same or starts to deteriorate, then the tightening period will be postponed.

Simply put, investors have another 2 months in reserve to keep their money in risky assets and earn more, especially since inflation is still at a sufficiently high level and there is nowhere to rush. As soon as the start of tightening is actually announced, then risky assets will begin to impulsively decline. Since bitcoin has been confidently entrenched in the number of assets in which everyone, young and old, invests for a couple of years, there are no reasons to continue falling. At least until the November meeting of the US Federal Reserve, when the start of tightening will be announced for sure (or not announced). In addition, to get to $ 30,000, bitcoin had to break down the range of $ 40,000- $ 42,000. This could not be done, because in this range, buyers were happy to collect cheaper everything that was offered, taking advantage of the decline.

What are the important levels of BTC now?

Now it is important for bitcoin to overcome the range of $ 49,000- $ 50,000, since the breakdown of this zone will cancel the fall scenario, which started on September 7, when the price collapsed from $ 52,000 to $ 42,000 in a few hours. Upon the breakdown of this range, the price will move to test the level of $ 54,000, and if it can break above it, then the road will open to renew the historical maximum in the region of $ 65,000. The price is now supported by the range of $ 40,000- $ 42,000.

Will there be a new rise in bitcoin?

Bitcoin retains a fairly strong upside potential. Even if the actual start of tightening monetary policy, it will still remain soft for several more years against the background of what it was before the start of the pandemic. For investors, this is an opportunity to continue earning, but the bulk of the capital will no longer go to risky assets, respectively, the growth dynamics of the stock, commodity and cryptocurrency markets will decrease, but they will continue to grow slowly. Today, bitcoin has every chance to gradually reach its historical maximum and renew it. Accordingly, if this happens, the price could reach $ 70,000 and possibly $ 75,000. However, this will largely depend on how the world economy develops further and whether monetary policy will be really tightened. If the deadlines for tightening are moved in November, then in December Bitcoin may grow even more.