Bitcoin’s price has struggled in 2022. After hitting a record high of nearly $70,000 in 2021, the price has collapsed to around $20,000. This means it is down more than 68% from its all-time high. So, should you buy the BTC dip?
Why has BTC fallen?
There are several reasons why Bitcoin price has crashed hard in recent months. First, Bitcoin crashed because of the declining fiscal monetary in the United States. Unlike in 2020 and 2021, the US government has not announced any major fiscal stimulus. In 2021, the country provided trillions of dollars in fiscal stimulus, some of which ended in Bitcoin.
Second, the BTC price collapsed due to the actions of the Federal Reserve. After years of keeping interest rates extremely low, the Fed has embraced an extremely aggressive tone this year. It has raised interest rates by 225 basis points this year and has begun to scale down its balance sheet.
In most periods, risky assets tend to underperform in a period of high interest rates. Indeed, the three major US indices such as the Dow Jones, Nasdaq 100 and S&P 500 have all entered a bear market as stocks tumbled. Likewise, other popular assets such as gold and silver have also retreated.
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Meanwhile, it seems that Bitcoin demand has fallen sharply lately. First, on-chain data shows that the activity level in the network has decreased. In addition, results from companies like Block and Coinbase showed that the number of Bitcoin traders is declining.
So, should you buy the Bitcoin dip? In my opinion, I believe that one can buy this dip using a dollar cost averaging technique. First, it looks like the coin is forming a double bottom pattern. There are also signs that inflation is on the decline, prompting the Fed to slow down rate hikes in the coming months.
Bitcoin price prediction
The four-hour chart shows that the BTC/USD price is forming a double-top pattern, the bottom of which was 17,708. In price action analysis, this pattern is usually a bullish sign. At the same time, the accumulation and distribution indicator has moved slightly upwards.
Therefore, as long as the bulls can stay above the key support of $17,708, there is a good chance that the coin will start to gain momentum. However, as I wrote on Friday, a drop below this support will cause the coin to crash below $13,000.