Bitcoin slump is affecting other cryptocurrencies in the sphere as they also experience value decrease
2021 saw many ups and downs in the cryptocurrency market. While Bitcoin recorded an impressive spike, other digital tokens like Ethereum, Cardano, and Solana outperformed BTC on a yearly growth rate. On the other hand, memecoins like Dogecoin and Shiba Inu showcased a tough fight, which eventually led the digital tokens to reach record highs. In a nutshell, the past year had many eventful happenings throughout. Because of the outstanding performance of cryptocurrencies, investors thought that 2022 might bring more to play. Unfortunately, things didn’t roll out as they wished.
2022 has begun on a gloomy note with everything starting from top cryptocurrencies like Bitcoin to memecoins such as Shiba Inu recording big falls. In the first seven days of the year alone, the cryptocurrency market has lost many stances. Since BTC is synonymous with the cryptocurrency sphere, the Bitcoin slump is also having a direct impact on all digital tokens. Even disruptive technologies including NFTs and Metaverse couldn’t retrieve the falling prices. However, one thing that experts constantly highlight is that the cryptocurrency market, especially, BTC is at the early stage. Therefore, investors have a lot more to see before they get complete fruition. For long-term investors, the Bitcoin slump might feel like a normal thing extreme volatility and instability is just part of the whole evolution. Despite the current trend, experts say, Bitcoin’s price will touch US$100,000 in the coming months without fail.
What is Contributing to Bitcoin’s Price Fall?
Bitcoin recorded its all-time high price in October 2021 after Bitcoin ETF made its debut in the NYSE. Investors were very optimistic about this move. However, post the ATH, things didn’t look good for BTC. The cryptocurrency even skipped the much-expected Santa Claus rally this year and entered 2022 on a negative note.
Bitcoin slump continued to head towards new lows. BTC lost over US$80 billion since the beginning of the year. The cryptocurrency has even broken its long-stood resistance level of US$43,000 in the past 24-hours. This happened after the release of minutes from the Federal Reserve’s recent meeting. The Federal indicated that they don’t encourage aggressive policy action, sapping investor appetite for riskier assets such as cryptos.
Since 2020, the cryptocurrency market has benefited a lot from the Fed’s massive liquidity injection. With inflation at its heart, money lost its value while Bitcoin gained momentum. However, this meeting indicated that officials were willing to withdraw stimulus sooner than many had previously expected. They are also taking some preventive measures to keep investors away from cryptocurrencies. Despite all these moves, experts say that Bitcoin is still headed towards the US$100k mark in 2022.
Investors Doing a Tax Play
While the Bitcoin slump is getting more real, investors are doing a tax play to gain more profit. Cryptocurrency investors have a way to take advantage of the situation that other investors can’t. Besides, the investors actually get double the benefit from doing this.
Initially, they sell their crypto assets at loss and claim a tax benefit from tax-loss harvesting. Tax-loss harvesting is working to reduce or eliminate capital gains tax owed on winning investments sold for again. After selling the asset, investors buy back the same cryptocurrency before it makes a comeback. While anti-abuse rules prevent stock investors from buying the same stock they sold for 30 days. Cryptocurrency has no such limitations.
Bitcoin in 2022
Bitcoin predictions in 2022 represent both its extremes. While some investors believe that the digital token will reach US$100k, others say that it could completely crash because of the approaching government guidelines and restrictions.
But on a general scale, BTC is expected to see more adoption since people will get a better understanding, regulatory quality, and blockchain gaming facilities. According to a prediction, more than 500 million people worldwide will own Bitcoin by the end of the year. More countries like El Salvador might start accepting BTC as a legal tender. However, despite the positive effects, Bitcoin will lose its dominance since new cryptocurrencies like Etheruem and Cardano are already on their way to gaining more investors.
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