Bitcoin Might Lose Almost 100% of its Value Before 2022 Ends

The popular crypto analyst DonAlt warned that bitcoin might not be out of the woods yet

Bitcoin has lost roughly 80% of its value since its all-time high last November. It was approximately a year ago when the industry was booming, led by the massive gains charted by the largest cryptocurrency. Perhaps fueled by the futures ETF launched in the US, bitcoin price had pumped to US$69,000, marking a fresh all-time high. Central banks turned their monetary policies from printing excessive amounts of their respective currencies to raising interest rates, trying to battle the galloping inflation they created. This, along with the war in Ukraine and a few other macroeconomic factors, pushed riskier assets south, and the Bitcoin price decline was no exception. But the landscape worsened following several industry-wide collapses, started by Terra's spectacular fallout.

But the popular crypto analyst DonAlt warned that bitcoin might not be out of the woods yet. By comparing the current bear cycle with the previous two, the strategist said BTC price could fall as low as $9,500 if it mimics the 2014-2015 bear market or $11,000 if the events from 2017-2018 transpire again. Will Bitcoin lose value and fall back to zero by the end of 2022?

Bitcoin Supply and Demand

Supply and demand influence the prices of most commodities more than any other factor. Bitcoin's market value is primarily affected by how many coins are in circulation and how much people are willing to pay. By design, the cryptocurrency is limited to 21 million coins—the closer the circulating supply gets to this limit, the higher prices are likely to climb. It is difficult to predict what will happen to prices when the limit is reached; there will no longer be any profit from mining Bitcoin.

As big financial players compete for ownership in an environment of dwindling supply, Bitcoin price will likely fluctuate in response to any actions they take. At the time of writing, BTC trades at US$19,000 with 0.4% profit and a 2% loss in the last 24 hours and 7-days, respectively. The benchmark cryptocurrency has been one of the worst-performing assets in the top 10 by market cap as XRP (+30%) and Solana (+7%) take the lead.

Bitcoin has plunged more than 52% year to date and is now hovering around US$21,000 per coin, according to data from Coindesk. The most popular cryptocurrency has shed about 70% of its value since hitting an all-time high of roughly US$69,000 in November. The entire crypto market is feeling similar pain. The overall market capitalization of crypto assets has dropped to less than US$1 trillion from its November 2021 peak of US$3 trillion.

It's the first time since 2021 that the asset class has been worth less than US$1 trillion. Many other assets are also experiencing volatility that's shaking investors. The S&P 500 Index this week fell into the bear market territory, defined as a drop of at least 20% from the most recent high. Bonds are also sliding, leaving investors few places to hide in markets. 

Reasons behind Bitcoin price decline:

Dozens of mainland Chinese cities, including Shanghai, are in covid-related lockdowns, and this is negatively affecting companies around the world. The Russia-Ukraine war is also costing the world billions. 

Over 40 countries, including China, have either outright banned crypto or have cut off banking access to the ecosystem, or prohibited cryptocurrency exchanges. It is one of the reasons for the Bitcoin price fall and why it will reach rock bottom before 2022 ends. 

It has imposed a flat 30% income tax on crypto profits while disallowing any exemptions due to crypto losses. A 1% TDS is coming into force from 1 July, and a goods and services tax of 18% or more is also expected. Despite the taxes, the government has made it clear that crypto has not been legally recognized. This has had a huge negative impact on the Indian crypto ecosystem. 

The first country to make Bitcoin legal tender has been unable to get its citizens to use it. And their Bitcoin Bond met with zero interest. It is one of the reasons for the Bitcoin price fall and why it will reach rock bottom before 2022 ends. 

Examples – Ronin exploit ($615 million), Solana Wormhole exploit ($326 million), the Beanstalk flash loan attack ($181 million), and the Qubit exploit ($80 million). These exploits and scams bleed investors and severely impact sentiment. 

Crypto data firm CryptoQuant's BTC leverage ratio hit all-time highs in early January, meaning more investors were taking on risk in the crypto space. Just like in traditional markets, crypto investors will often use debt to finance purchases of futures. It is one of the reasons for the Bitcoin price fall and why it will reach rock bottom before 2022 ends. 

This is due to many plagiarized works, fake collections, spam, frauds, rug-pulls, and wash trading. It is one of the reasons for the Bitcoin price fall and why it will reach rock bottom before 2022 ends. 

The biggest problem the crypto markets face when leveraged investors liquidate a large portion of their assets is the overall liquidity of the markets. Unlike in the stock market, there aren't always a bunch of buyers waiting to snatch up unloaded coins. This is part of the reason why crashes tend to occur over weekends for crypto. There are fewer investors tuned in to buy when a bunch of coins is sold. 

Terraform Labs is the organization behind UST, LUNA, and Luna Foundation Guard. This selling pressure has also dragged the entire crypto market down. It is one of the reasons for the Bitcoin price fall and why it will reach rock bottom before 2022 ends. 

Yuga Labs, the project behind Bored Ape Yacht Club NFTs, had announced the sale of land NFTs of its Otherside Metaverse. This pumped the prices of ApeCoin. But the land NFT sale happened at a flat rate of 305 ApeCoin tokens per plot instead of an auction-style sale. This led to a collapse in ApeCoin prices.