The cryptocurrency market is currently going through a period of increased volatility as global economic conditions continue to deteriorate amid the backdrop of rising inflation and interest rates.
As the headwinds affecting the global financial markets have overcome all the effects of bullish sentiment, many crypto investors are predicting that the price of Bitcoin (BTC) could drop as much as $10,000 before finding a market bottom.
BTC/USDT 1-day chart. Source: TradingView
While many traders have ridiculed the idea of Bitcoin dropping below its all-time high in 2017, the recent drop to $17,600 suggests that this bear market may be different than the previous one.
Here is what many analysts are saying about the possibility of Bitcoin dropping to $10,000 in the next few weeks.
Historic pullbacks point to $10,350 low
An insight into how BTC has performed in the short term can be gleaned by looking at its performance during the 2013 and 2017 bear market cycles. In 2013, Bitcoin’s maximum withdrawal was 85%, which occurred over 407 days. The maximum drawdown in 2017 was 84% and this period lasted for 364 days.
The historical decline of Bitcoin. Source: Arcane Research
According to a recent report by Arcane Research, the current downturn has lasted for 229 days and so far has seen a maximum drawdown of 73%.
Arcane Research said,
“If Bitcoin follows the scheme of these cycles, the bottom should occur sometime in the late fourth quarter of 2022, as low as $10,350.”
While an 85% drop is always a possibility, Arcane Research also notes that “Bitcoin is now more intertwined in the broad financial markets, with the Federal Reserve, US elections, crypto regulations, and the stock market affecting its performance.”
Further evidence supporting the possibility of a dip into the $10,000 range was touched upon by cryptocurrency research firm Delphi Digital, which published the following chart stating that “From a higher time frame market structure perspective, the next place to look is at $10 K – $12,000.”
Brave New One Month Bitcoin Chart (BLX) Coin Indicator. Source: Delphi Digital
Based on the above chart, a higher time frame market structure support is likely to be located between $9,500 and $13,500.
Delphi Digital said,
“Coincidentally, this area aligns with the implied decline if BTC experiences an 85% drop from peak to trough.”
Would $10,000 be a good place to buy?
Not every analyst expects a drop to $10,000. Take, for example, Will Clemente of Blockware Solutions. According to Clemente, Bitcoin’s current range reflects a good place to accumulate.
Additional data from Glassnode shows that Bitcoin’s 200-week moving average, equilibrium price and delta price in a bear market floor pattern are in line with the 0.6 Mayer Multi metric analyzed by Clemente.
Bitcoin bear market floor models. Source: Glassnode
“Only 13 of the 4,360 trading days (0.2%) experienced similar conditions, occurring in only two previous events, January 2015 and March 2020. These points are marked in green on the chart.”
Based on the delta price scale, which remains unchanged, the potential drop for BTC is $15,750.