Will Bitcoin (BTC) Drop Below $20,000 in 2022?

There is a lot of talk right now about where the price of Bitcoin is heading. Some analysts are calling for a capitulation event that could cause an extreme drop in prices from the already deflated price of Bitcoin.

Calls for lows as bad as $8k – $14k are common right now. Will the price of Bitcoin really drop that much in 2022? Although I’m not a chart analyst, I have a lot of cryptocurrency knowledge and experience on my side. I’m going to share what I know about the Bitcoin situation right now to help you figure out what you want to do with your own investment.

Bear Market Scenario

Markets in general are in a bear market right now. The last 9 weeks straight of losses for Bitcoin have confirmed the same for crypto. Most analysts say we’re due for a capitulation event before the year is over. This scenario basically involves massive amounts of trades getting liquidated and investors cutting their losses by exiting their positions. This then results in dramatic price drops that tend to snowball.

People have been talking about this scenario now for the last couple of months. Price bottom predictions are pretty wide-ranging right now. Some are as low as $8k, although they don’t seem to have a lot of support. $14k is a more common prediction, which would require more than a 50% drop from current levels around $30k. $8k would require a drop of nearly 75%!

No matter what the actual price prediction is, the general consensus is that the market is headed for more pain before the year of 2022 is over. I tend to agree with this assessment, although I do have some doubt about the prices dropping as low as they say they’ll drop.

Macro Economic Environment

The overall economic environment is in a bad place right now. It’s hard to throw a rock in any direction right now without running into some kind of major issue that causes harm to the market. The Russian war with the Ukraine. Massive inflation rates causing prices to go up on everyday goods. Corporate profits rapidly declining. Seemingly endless political turmoil. Other markets such as stocks crashing. COVID continuing to flare up and causing random lockdowns including widespread lockdowns in China. The LUNA and UST crypto and stablecoin collapse. Pick your poison.

There was a lot of hope that Bitcoin would be a hedge against inflation, but this turned out to be false hope, at least for now. The price became highly correlated with the stock market up until just recently. When it finally decoupled, it did so in the wrong direction and performed worse as stocks began to rebound.

There’s obviously a lot of fear and uncertainty with investment markets and the world in general right now. None of this is helping the current price action of Bitcoin. It seems that until some really positive news surfaces, we may be in for more of the same for a while.

Long-Term Bitcoin Price Potential

Analysts talk about the price of Bitcoin eventually hitting $100,000, $500,000, or even topping $1 million. Timelines for these drastic increases are usually between 2025 and 2030. These predictions are also based on some assumptions that may or may not turn out to be true.

When someone is talking about Bitcoin hitting $1 million to $5 million per coin, they’re making really big assumptions that are usually based on the values of other assets. The value of gold or worldwide reserve currencies are often used in these calculations. Somewhere between $9 trillion and $14 trillion is invested in gold worldwide. If Bitcoin had a market cap $12 trillion, it would be worth $600k per coin. Assumptions that it can go even higher depend on it essentially becoming the world’s reserve currency and a standard investment for the largest corporations.

With really poor macro economic conditions, it does seem like the potential is there for this to happen long-term. However, I believe it would take the perfect storm of events to occur in the right order, and those storms would likely cause all of us problems that we don’t want. In reality, I hope Bitcoin isn’t worth $5 million by 2030 because it would have some huge ripple effects elsewhere in the world. $500k seems more reasonable to me by 2030 as it reaches a level similar to gold investments. I guess I can take a look back here in eight years to see if I’m right.

MicroStrategy Investment

Michael Saylor, CEO of MicroStrategy, is a huge advocate for bitcoin. At the current price level around $30,000, their 129,218 bitcoins are worth nearly $4 billion! There is talk about their $205 million bitcoin-backed loan. This loan would face a margin call and get liquidated if the price drops to around $21,000. There are likely other bitcoin loans that would also face margin calls if the price went into the low $20k range, so these potential liquidations are like a big reason why some analysts think a big capitulation event is coming.

Just because a huge chunk of bitcoin faces a margin call at a certain price point doesn’t mean it will actually get liquidated though. Investors can simply put up more collateral if the price drops too low. Saylor has stated on many occasions that he will not sell his BTC holdings and will defend his positions from a margin call.

The key here is that MicroStrategy isn’t over-leveraged. Less than 20,000 of their BTC are pledged as collateral for this loan, and they have more than six times that amount. The BTC price would have to drop below $4k to reach a point where their holdings wouldn’t provide enough collateral. It really doesn’t sound like there’s any danger of a capitulation event taking place from this investor that happens to be one of the largest holders of Bitcoin. Their average purchase price is around $30k, so I’d expect them to add to their holdings when prices drop below that level and those purchases can drastically help to provide support against capitulation.

Overall Bitcoin Sentiment

I believe a lot of different companies are in similar positions as MicroStrategy. Elon Musk and Tesla own about 48,000 BTC. Corporations like Greyscale Bitcoin Trust own more than 650,000 coins and are among the biggest holders. The creator of Bitcoin, Satoshi Nakamoto, is said to own around 1 million bitcoin from being the original miner on the network. You

Companies like Marathon that mine bitcoin accumulate their coin and rarely sell, if ever. Even the governments of entire countries have started to buy Bitcoin in recent years. El Salvador has famously made it their national currency, although they only hold a couple thousand BTC. The Bulgarian government is said to have more than 200k BTC.

When you combine all of these big holders together, you end up with a pretty decent portion of the entire BTC supply. The top 100 wallets have about 20% of all tokens in circulation. Quite a few of these have been public about their stance to never sell.

This sentiment for Bitcoin could very well be the reason why some of the analysts end up wrong about the future price action. I still think capitulation is possible, but it’s not going to be as widespread as it would be if you didn’t have these die-hard supporters.

My Bitcoin Price Analysis

Keep in mind here, I’m not a professional trader or price analyst. Although, I should mention that my grandpa invented his own stock market trading method many years ago and has a published book, so perhaps it’s in my blood.

I do expect some kind of capitulation event to happen sometime in the next few months. I don’t currently have any open cryptocurrency positions, although I do mine Ethereum and Bitcoin, so I do constantly accumulate some of each. I’m personally waiting for this drop before I enter the market again.

With that said, I don’t see the capitulation being as severe as expected. I could see the price getting into the 20k – 22k range with a brief dip possible below those levels. However, I really think 20k is going to be a heavily defended position. Tons of investors, big and small, would love to enter long-term positions at 20k, myself included. I think there could be enough interest to limit the downside to the low 20k / upper 10k area and propel the market upwards from there. Past that it is really hard to say what could happen, but I do see Bitcoin having a long-term future.

For now, I’ll make these calls barring some unforeseen event happening in the future that throws all of this off…

• BTC Price Decline to 18k – 22k range by end of summer 2022
• From the Market Bottom, Bitcoin Prices Increase to 40k by early 2023
• New ATHs in late 2024 to 2025 – 80k to 120k
• Long-Term Bitcoin Price Prediction for 2030: 500k