How Bitcoin Could Go To $10,000, Not $100,000

Is the hype of the past few years hitting a wall of reality? Here’s what the charts say.

Several Wall Street pundits have speculated that Bitcoin could hit a price of $100,000 this year. Some predicted that last year, but that’s a moot point now. I am not in the $100,000 camp. While I do believe in the future of the blockchain, when it comes to the tokens that have captured the imagination of a generation of investors, I do what I always do: I look at the charts. And when I do, I see reward potential (because any investment can go up at any time), but much greater risk that the current rout will not only continue, but be one of breathtaking proportions. I see a greater chance of Bitcoin hitting $10,000 this year than $100,000. Here’s how I break it down.

Bitcoin, and cryptocurrency in general, have fallen on hard times. As the stock market declares war against “risk-on” investments (those which are popular because of future hopes, not fundamental realities), Bitcoin has been dragged down with them.

That’s a sign that cryptocurrency is not some kind of alternate currency or life preserver for investors. It is more like a commodity. Its price is determined by supply and demand. But demand is dropping. And that leaves crypto extremely vulnerable, in the way that dot-com stocks were vulnerable in the year 2000.

Here’s what Bitcoin has going for it right now:

1. Dip-buyers have been relentless, so they might just pony up again, following a 50% drop from the recent highs. After all, it seems to be conventional wisdom that crypto assets are going to go through a bunch of those, on the way to making you ridiculously rich.
2. “It’s still way above where I bought it” cry the early holders, and that makes them feel like this drop is merely a flesh wound (quoting Monty Python).

Here is a chart of Bitcoin’s price since it spiked from under $10,000 over $68,000 during the financial markets’ recovery from the initial pandemic shock in 2020.

Now, here’s what Bitcoin has stacked against it as we enter late January:

1. The bloom is off the rose. This 50% decline comes at a time when the stock market is also cratering, quickly. Psychology works in both directions, and that means the risk of a big “shakeout” among the crypto crowd could occur at any moment…even on a weekend or weeknight.
2. Bitcoin’s return the past 3 months (through last Friday) is -39%. That is close to the worst 3-month performance in the “modern” Bitcoin era, after it was discovered by the mainstream. By the way, as of 3 months ago, the 3-month trailing return of Bitcoin was a whopping +125%. That seemed unsustainable when it happened back in October, and that is proving to be the case.
3. Bitcoin has a technical “support level” around $32,000, a point at which it stopped falling twice last year. So, a decisive break below that level would be a serious technical danger.
4. The bubble may have already burst. When emotional asset bubbles burst, they tend to do so with relentless persistence. The environment quickly goes from “I can’t lose” to “I thought I couldn’t lose!” Think about it. Crypto has become one of those investment vehicles that has made people…many people…feel like if they didn’t own it, they were foolish. That’s what bubbles do. And, there is still debate about what exactly crypto is within the vast array of financial vehicles. Currency, commodity, revolutionary asset, gold replacement, speculative toy, learning tool for younger investors, world-changing blockchain enabler…or just a fad that will be remembered in history alongside Pets.com, pet rocks, and tulip bulbs?

So, I don’t see Bitcoin at $100,000 any time soon. I do see potential for a “round-trip” back to the level from which the current mania started. That level? Around $10,000. That’s another 70% down from here. That’s not so much a prediction, but a projection...if the “buy-the-dip” mentality that has ruled the crypto climate fails to re-boot itself soon, the combination of forced sales by leveraged investors, panic by inexperienced market participants, and the other risks highlighted above could make this a cruel year for crypto investors.

So, if you are crypto investor, it’s a good time to take account the role it plays in your overall investment picture. This article cannot be a source for the many, many techniques you can use to manage risk, hedge, diversify, etc. Just know that there are many. But at the end of the day, every investor that has counted on Bitcoin and/or its cousin-coins to lead them to quick, massive wealth needs to re-think that plan. The “easy money” era in crypto is likely over.