The cost of bitcoin has been declining since the beginning of this year. The coin reached a historic high of $69 thousand in November 2021. By mid-July, 2022, it was trading at $20.77 thousand.
August, as the history of observations shows, is traditionally not the best month for Bitcoin. Over the past 11 years, in 6 cases, cryptocurrency has shown negative dynamics over a designated time.
How Will Halving Affect Bitcoin?
It is impossible to draw up a full-fledged forecast of Bitcoin for August 2022 without taking into account the influence of halvings on the behavior of cryptocurrency.
A decrease in the speed of Bitcoin inflow to the market amid growing interest in cryptocurrencies, as history shows, pushes the BTC rate up. At the same time, during periods when the market is "saturated" with an asset, the so-called crypto-winter comes — a period of a protracted price drop. It can be assumed that August 2022 has been such a period.
The last halving in the Bitcoin network was recorded on May 11, 2020. The event halved the BTC mining speed. Against the background of the growing interest of market participants in cryptocurrencies and a decrease in the supply of coins, Bitcoin updated the absolute maximum on November 10, 2021, at an altitude of $68789.
To understand how BTC can behave, you need to analyze cryptocurrency movements in the periods after the Halvings on November 28, 2012, and July 9, 2016.
Both times the price of the asset decreased significantly in the next few months, gradually returning to its previous values. Thus, Bitcoin's price forecast, taking into account the influence of halving, suggests that cryptocurrency growth in August 2022 is unlikely.
Bitcoin, as well as the entire crypto market and stock markets, is now being pressed by the intensification of manifestations of the global recession.
For example, in the UK inflation reached a record 10%, in China, there is a threat of collapse of developers, because of which the risk of default in China becomes more and more distinct, and in Europe inflation updates 40-year highs. At the same time, the European Central Bank cannot raise the key rate due to the threat of default in Spain, Italy, Greece, and France.
In the IMF report "Cryptocurrency Relations: The Impact of Cryptocurrencies on Equity Markets" for January 2022, the global regulator emphasized the growing correlation between cryptocurrencies and stock markets in the United States and emerging markets. The report noted that before the pandemic, popular cryptocurrency assets, such as Bitcoin and ether, were poorly correlated with major stock indices, but cryptocurrency prices and US stocks rose sharply after monetary easing by central banks in early 2020.
Using daily data on price volatility and yield, the IMF found that since the pandemic began, the impact of Bitcoin price volatility on the S&P 500 and MSCI emerging markets has increased by about 12–16%, and from its yield — by about 8–10%. Tether's secondary influence on global stock indices also increased by about 4–6%.
In absolute terms, an IMF analysis shows that the impact of Bitcoin on world stock markets is significant — it accounts for about 14–18% of fluctuations in share price volatility and 8–10% of fluctuations in share yields. As a result, investors seek to shift to protective assets, abandoning cryptocurrency.
The forecasts of many experts say that by the end of this year Bitcoin may fall to 10–12 thousand dollars. This is quite real, since the global economy is experiencing a fall, and cryptocurrencies are growing after the stock exchange exclusively on optimism when investors believe in the growth of high-profit assets. Now there are no such expectations.
Bitcoin Price Analysis
Bitcoin began the year 2021 at $28 994.01. The coin grew over the past year and in November reached a historical high of $69 thousand. After that, the BTC price fell quite quickly and ended the year at about $46.3 thousand.
In 2022, the Bitcoin drop continued. It has fallen to almost $33 thousand by January 24. By the end of March, the cryptocurrency managed to recover to the level of $47 thousand, but not for long. In early June, the value of BTC had already fallen to $29 thousand, in mid-June — to $25 thousand, and then fell even lower — on June 18, the coin collapsed to about $17744, after which it recovered to a level slightly above $20 thousand. On July 13, the price of Bitcoin again fell to almost $19 thousand amid poor monthly inflation rates in the United States. According to the cryptocurrency aggregator CoinGecko, over the past year, BTC has lost 36.8% of its price.
What Investors Should Pay Attention To
What are the main conclusions from this data that can be drawn for investors? Firstly, the change in trends noted by the IMF and Morningstar reflects the frantic pace of development of a rather young cryptocurrency market. As cryptocurrencies become a class of assets with growing adaptation around the world, their correlation with other asset classes may change over time during market cycles.
For investors who want to diversify their portfolio, it is important to look at asset correlations, but the full picture cannot be overlooked. In particular, we are talking about their investment goals and the time horizon which determine the level of risk permissible, and, accordingly, the structure of portfolio assets.
Investors should analyze the markets themselves and be aware of key events in the cryptocurrency market, instead of simply following the latest trends. This will help make informed and informed decisions consistent with risk tolerance and goals.
What Else to Pay Attention to: International Conflicts And State Regulators
In 2022, the attention of investors is riveted on the situation in the geopolitical arena. The conflict between the Russian Federation and Ukraine, also lead to a crash of Bitcoin and the whole crypto market. Increasing tension in the geopolitical arena may negatively affect the position of BTC. Escalating conflicts between China and Taiwan, as well as Kosovo and Serbia, can make the situation worse.
Another topic for discussion in the crypto community was the pressure from financial regulators. The authorities of many countries, including the United States, the largest center of the crypto industry, began to fight inflation. To this end, America, among other things, has abandoned quantitative easing policies. It is noteworthy that against the backdrop of the crisis, many crypto projects faced a liquidity crisis.
In 2022, the US Fed headed for an increase in the base rate. The changes are designed to overcome inflation. Many participants in the crypto community believe that an increase in the Fed's base rate will lead to an update of the lows in the digital asset market. Some of the experts interviewed by the editors of the BeInCrypto see prospects for reducing Bitcoin below $10 thousand.
Bitcoin Price Forecasts for 2022
As of July 15, 2022, the short-term forecast for BTC from CoinCodex was bearish. The service expected a drop in the price of 6.56% to $19436 — by July 20. 16 technical indicators gave bearish signals and 14 — bullish ones. The resource called the current period is not the best time to buy bitcoin.
Wallet Investor's forecast for 2022 was quite encouraging. According to the website, the average BTC price can recover to $32 909 by the end of December. In mid-July 2023, the average value of the coin may reach $37132.3, predicts Wallet Investor. In July 2025, it will rise to $68293, and in 2027 — to a new maximum of $97875.8.
The long-term outlook from DigitalCoinPrice also looks quite optimistic. The service expects an average BTC price in 2022 at $28923.47 and in 2025 — at $47467.27. By 2030, the resource suggests, the average price of Bitcoin will be $99 044.76.
Let Us Summarize
The history of the Bitcoin movement shows that August is not the best month for cryptocurrency. Analysis of halving-adjusted BTC behavior also indicates that the likelihood of coin growth this month is extremely low. In addition, the crypto market is under the pressure of conflicts in the geopolitical arena.
The situation may be aggravated by the consequences of the struggle of regulators of countries with inflation. Therefore, the forecast of Bitcoin for August 2022 is negative. It can be assumed that the cryptocurrency will spend a month on the sidewalk. At the same time, the risks of updating the lows are not excluded.
It is important to remember that cryptocurrency markets remain extremely volatile, which makes it difficult to predict the price of coins even in the range of several hours, not to mention long-term forecasts. Therefore, analysts can and often are mistaken in their predictions.
If you plan to invest in Bitcoin or other cryptocurrencies, we strongly recommend always conducting your own research.