What’s the Worst-Case Scenario for Bitcoin This Year?

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Continued inflation, economic woes, and regulation could mean we haven’t seen the end of Bitcoin’s price slump.


Key points

  • Peter Schiff warned that Bitcoin could slip to $10,000 while others continue to think the whole crypto market could collapse.
  • Pay attention to inflation figures, recession predictions, and upcoming regulatory moves, as all of these could impact Bitcoin’s price.

The crypto market has struggled in the past six months, with Bitcoin (BTC) down about 50% from its November high. As I write this, Bitcoin has pushed above $31,000 after weeks of hovering around $29,000 to $30,000. Some hope this could be a turning point but it’s much too early to say. Many investors want to know what might happen next. Is this the bottom? Or can things get worse for crypto prices?

Worst-case scenario for Bitcoin

It’s worth bearing in mind that the most dire predictions for Bitcoin come from people who don’t have much faith in crypto in the long term. For example, popular financial commentator Peter Schiff is a prominent crypto skeptic. He tweeted in May that Bitcoin could fall as low as $10,000. “If #Bitcoin breaks decisively below $30K it seems highly likely that it will crash below $10K,” he said.

Schiff may be a skeptic, but there is a real possibility that Bitcoin could fall as low as $10,000. Indeed, some crypto critics warn it could collapse completely. We’re in a very different economic climate than the one that saw the total crypto market cap climb to around $3 trillion last year.

The trouble is that nobody has a crystal ball and it’s almost impossible to know what’s in store. There are too many factors that could have an impact on Bitcoin’s price, for good or for bad. Here are some of the elements crypto investors might want to watch — combined, they could trigger a worst-case scenario.

1. Inflation

The Federal Reserve is pulling back on various pandemic-related stimulus measures in an attempt to get inflation under control. Inflation is the highest it’s been in 40 years, which is driving people’s living costs up. However, the Fed’s economic tightening measures are a large part of the reason crypto prices are down. Pay attention to inflation figures and the Fed’s rate hikes — both have a big impact on whether crypto prices might go up or down.

2. The possibility of a recession

There are a lot of warnings from economists that we could be on the edge of a global recession. The economic clouds of spiraling cost of living, supply chain issues, and the Russia-Ukraine crisis, all loom heavy on the horizon. A recession isn’t a certainty, and is more likely in Europe than the U.S. Nevertheless, crypto investors should brace for further economic woes.

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3. Increased crypto regulation

In March, President Biden signed an executive order which set out the framework for developing further crypto regulation. It asked various government departments and regulatory bodies to put forward analysis and recommendations. While the tone of the executive order was relatively positive, we don’t know what shape any final regulation will take. In the short term, it’s very likely additional crypto regulation will pull prices down. In the longer term, reasoned regulation could build confidence and help the industry. But we’ve got a lot of hurdles to get over first.

Invest for the long term

There are various other factors that could have a major impact on Bitcoin and cryptocurrency prices. For example, the uncertain reserves for Tether (USDT), the world’s leading stablecoin could still cause it to collapse. Ethereum is in the process of a major upgrade, and any technical issues could erode investor confidence. Newer technology could undermine the very premise of Bitcoin.

All in all, cryptocurrency is a high-risk investment and continued short-term volatility is to be expected. What’s important is your long-term view on how Bitcoin might perform. Perhaps you think it has value as a form of digital gold, or that it could transform the way we use money. You may even agree with Ark Invest’s prediction that the lead crypto could be worth $1 million by 2030. Investing with a ten or twenty year framework can help investors ride out short-term turbulence.

That said, even if you are optimistic about buying crypto, don’t ignore the risks. Only invest money you can afford to lose and make sure crypto only makes up a small part of your wider portfolio. That way, even if the worst happens and crypto fails completely, it won’t derail your finances. Think about not only the worst case scenario for Bitcoin this year, but the worst case scenario in the coming decade.

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