Can a Crypto Crash Really be Predicted?

Can a crypto crash really be predicted? The crypto trading and investment is ideally a speculative venture and if done right it can offer very high returns.

In fact, it has really made quite a few people millionaires over the years.

However, it is not unknown to anyone that the crypto market is extremely volatile, so much that the price of a particular crypto coin can be at its record high one day and reach to the record low on the next.

Such a property, though unique, can be extremely painful for the investors and traders who may suffer huge losses within a very short time.

All these successful crypto traders and investors have been able to speculate the movements in the prices of the coins they invested in correctly to make such huge profits.

Ideally, speculating on the crypto market is rife during a crash and you may even be successful in predicting a price movement.

Crashing of the crypto market is quite common and the prices of Bitcoin and other crypto coins have fallen time and again.

Now, the question is can the price of crypto be really predicted with so much accuracy or is it just a matter of chance given the fact that the crypto market can fall by as much as 40% if not more in a matter of a few weeks.

Yes, the market does recover but is it still worth speculating, you may ask.

However, in order to do that correctly you will need to look at the historical data and price charts to find out whether or not there is a pattern.

Well, this article will enlighten you about that and a lot of other things to understand whether you can and should predict a crypto crash.

Can Crypto Crash Really be Predicted?

Can a Crypto Crash Really be Predicted

There are lots of reasons for a crypto market to crash apart from Fear, Uncertainty and Doubt or FUD that fuels panic selling especially by the inexperienced or new participants in the market.

This causes the market to collapse. It is all about being greedy when others are fearful and being fearful when others are greedy.

However, crypto is here to stay in spite of the fact that the market is cyclical and needs to be corrected from time to time.

People will need fiat money for several reasons and those who hold crypto can get it easily by cashing out their holdings.

Just as this influences the market sentiments, price movements and the actions of the market participants, there are also several other reasons that may cause the same.

Getting the finance in order as the tax year end approaches, expiration of a futures contract, comments on social media, FOMO or Fear of Missing Out, all can spike the price charts unnaturally.

However, there is no need to panic.

Just a couple months into 2022 and Bitcoin and other crypto coins have already had a dreadful start.

The downward trend noticed last year continued due to the mounting pressure on the prices.

In such a situation, Wall Street giants like Goldman Sachs predicted that the price of Bitcoin will rise and within the next five years it will reach to such an extent that it will compete with gold as a store of value.

Bitcoin currently has a market cap of about $800 billion while that of gold is about $11.4 trillion.

Theoretically, if the share of Bitcoin as a store of value is expected to rise by 50% in the next five years and there is no growth in the demand for stores of value overall, the value of Bitcoin will be more than$100,000 if the annualized returns are compounded at a rate ranging between 17% and 18%.

Well, such a prediction in the case of Bitcoin is possible because it has a wide variety of applications apart from simply as a store of value but the crypto market is much, much bigger than Bitcoin alone.

Therefore, it raises a natural question which is whether the returns and price prediction of Bitcoin can be applied as plausible outcomes for other crypto coins or not.

Well, such prediction for Bitcoin especially can be possible because it has a good reputation as a store of value which is considered to be similar to the store of value of gold, a conception that was driven by the towering inflation that hit the economies all over the world last year.

This is why reputed investors termed Bitcoin as ‘the fastest horse to beat inflation.’

In fact, several crypto investors believe that Bitcoin even comes with far better monetary qualities than gold.

Therefore, when it has a mass adoption as a store of value, Bitcoin will have a huge potential to become the universal unit of account and grow into an international reserve currency.

It is all due to the characteristic attributes of Bitcoin which include and are not limited to:

  • Its scarcity due to its hard capped supply of up to 21 million coins
  • Its digital durability
  • Easy accessibility and
  • Its resistance to external control.

Moreover, with such attributes, Bitcoin has proved that it is just not an asset class but rather it is a reliable network that can become a reliable and viable global payment system because it is programmable money.

Therefore, in 2022 you can expect to see Bitcoin to become a unit of account and a medium of exchange as well apart from being a reliable store of value.

Within a period of two years, the price of Bitcoin has skyrocketed crossing over 400% which also pushed the stock markets to an all-time high.

As for the other crypto coins, such as Ether, a leaked prediction by the Goldman Sachs indicated that this second-largest crypto coin after Bitcoin is highly likely to overtake Bitcoin to become the more dominant store of value.

It is all due to the current craze of Non-Fungible Tokens or NFTs and the rise in interest in the Decentralized finance or DeFi platforms.

However, coming back to Bitcoin, its huge price surge over the past few years has encouraged countries, companies, and even influential individuals to start experimenting with the coin like never before.

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For example, Business intelligence software company MicroStrategy converted its cash reserves into Bitcoin which inspired the chief executive of Tesla, Elon Musk, to add $1.5 billion worth of Bitcoin to the balance sheet in January 2021.

There are also a few countries such as the Central American country of El Salvador that has started adopting Bitcoin as the national currency along with the US dollar and there are several other countries that have a plan to integrate it into their society and economy.

Therefore, it is clear from the above that there is a lot of prediction going on about the eventual price of Bitcoin and other crypto coins which make it feel that this is quite feasible.

Point of View of Experts

A few comments of the experts regarding this matter will make things clearer to you.

Here are a few experts’ comments on what is going to happen to Bitcoin, Ether, XRP and others especially after the recent crash in their prices along with what happened exactly in the crypto market last year.

In November last year, the crypto market experienced a huge dent in its value when the prices of Bitcoin and other crypto coins dropped by more than 10%.

The crash in the crypto market last year wiped crypto coins worth nearly a billion dollars from the market.

Surprisingly, all these happened in less than a week’s time after the price of Bitcoin reached its record high of more than $69,000!

Though Bitcoin was able to recover its value somewhat and reached up to $60,000 by the year end, it started to drop again to reach around $57,000, which signified a loss of around 18% in just two week’s time.

Other crypto coins such as Ether, Cardano, Solana, Dogecoin, Ripple, and Shiba Inu all followed the same path and dropped by almost an equal value.

The experts pondered on the cause of such crashing of the crypto market and found that there are several factors that contributed to it.

One of the major reasons is that the US Securities and Exchange Commission or the SEC rejected numerous proposals of spot Bitcoin Exchange Traded Funds or ETFs. Experts think that, if these were allowed, it was highly likely that the world would have seen billions of dollars pouring into the crypto market.

Another significant factor that the experts’ think has contributed to the crashing of the crypto market last year is the crackdown on Bitcoin mining by China citing its over-consumption of electricity and impact on the environment.

The experts also pointed to the rising interest rates to curb down inflation which has been strengthening against both crypto and other fiat currencies. This, they say, could have caused the crypto market to sway in the other direction.

Add to that, the natural cycle of crypto is also and always there when people tend to sell off their holdings when the prices of coins reach to a high which results in a significant drop in the value of the coins.

The experts feel that as of now it does not make any sense in investing in crypto. According to their predictions, the value of Bitcoin will continue to move southwards seeing signs of larger sales and the opening of several new short positions.

Also, a further cool-off in the case of Bitcoin could be seen in the coming months since the liquidations will be quite low as indicated by the historical data and the flat funding rates.

However, this will last for a short term, they feel, when the momentum will start to stall.

On the other hand, there are lots of experts and crypto analysts who are still very bullish about the future of crypto in the long term.

They think that pretty soon the value of Bitcoin will even cross the $100,000 mark setting a standard for the other crypto coins which will also try hard to be as close as possible to that mark.

Add to that, there is another significant number of crypto experts and analysts who predict the future prices of Ether and expect it to cross Bitcoin in value and become the largest crypto coin in the world replacing it, as said earlier.

Few even think that it will happen within the cycle, which is however very hard to predict when it will end but is expected to end mid-next year.

And, experts believe that if Ether can replace Bitcoin to become the Numero Uno coin, it will have a much larger market and since most of the applications run on the Ethereum blockchain network it will hike its market value to trillions of dollars with its activities all over the globe.

Knowing the Reasons

There are a few specific reasons for the crypto market and prices of coins to crash.

First of all, it seems that the crypto investors tend to take on too much risk while dealing with crypto and also take too much leverage.

More often than not, the investors use debt to fund their purchases of futures contracts.

Yes, this can help the crypto miners to protect them against future drops in price of the coins they are mining but for the investors it may result in high volatility in the short term.

And, if there is a drop in price of the coin they invested in, it will result in liquidation in the long-term positions.

When the holders start liquidating their positions, it will result in further drop in the prices of coins causing serious danger for the crypto market which is known not to have much liquidity as such.

Secondly, as mentioned above, the lack of liquidity in crypto markets may also cause some of the biggest problems when the leveraged crypto investors liquidate a huge portion of their crypto assets.

This will further affect the overall liquidity of the market because there will not be a lot of buyers waiting to grab the unloaded coins as it is usually done in the stock markets by the market waiting for any given opportunity.

This type of situation typically arises over the weekend in the case of the crypto markets.

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These coins then funnel into the wider market simply and create a surplus of supply with inadequate demand.

Thirdly, the regulations regarding crypto also cause the market to crash off and on.

For example, when China banned mining crypto coins in June 2021 there was a significant drop seen in the hash rate of the network since miners moved on to crypto-friendly jurisdictions.

This affected the production of new coins which, in turn, affected the price of the coins.

This is due to the directly proportional relation between hash rate and the price of crypto which is primarily because the miners are usually paid their rewards in crypto coins.

Fourthly, the security breach in crypto is another significant reason for price drops because it causes fear among the people.

The miner will be reluctant to mine any more coins which will hamper the production and thereby the price of the coins.

This is because most of the activities performed in the crypto market are driven largely by the sentiment of the investors and since this asset class does not have  an underlying asset to back up any security flaw will have a drastic effect in the production and price of crypto coins.

Fifthly, the volatility caused by the crypto influencers and key advocates may also result in a market crash because, once again, it will influence the sentiment of the market participants.

It can cause an inflow of capital as well as an outflow of it due to its lack of liquidity. For example, the withdrawal of Elon Musk can be cited.

Finally, correlations of the crypto market with the stock market, which seems to have intertwined with the traditional stock markets more noticeably due to its conventional adoption in the past few years, is also another reason for the market crashing.

This means that the crypto market may have the similar effects of inflation and interest rates in such situations as the stock market and crash.

With all this said market crashes are one of the risks in crypto investments which investors need to take account of.

Ideally, they should determine the time frame for holding the crypto assets and the price at which they should sell them when they predict a market crash if they cannot stomach such downturns.

Crypto Price Predictions

Now, take a look at the main aspect of this article – predicting the price of crypto coins.

These predictions are based on the records of the crypto market of last year including market cap and coin prices.

Though these predictions should not be taken as writings on the stone because it all depends on market fluctuations and stabilization, these are just what the experts seriously think would happen.

  • Bitcoin or BTC price predictions: The prices of Bitcoin have fallen by about 41% from its all-time high of $68000 plus down to low $ 40000 in a couple of months. Looking at its past records, the price of Bitcoin is bound to bounce back and reach even higher than its previous high. After weighing all possibilities, several experts suggest that the price of Bitcoin may cross $100,000 with a lot of larger corporations, financial institutions, and governments continuing to add it into their balance sheets.
  • Ethereum or ETH price predictions: The price of Ether, best known for its NFT blockchain to the new entrants, fell by almost 40% from a high $4000 down to low $3000. However, the price of it is sure to rise now with its Ethereum 2.0 and NFTs about to reach mainstream. There are many crypto experts who think that its price will be more than $10,000 with a few even expecting it to reach more than $20,000 and stay in five figures after that.
  • XRP Ledger or XRP price predictions: As compared to BTC and ETH, XRP usually has a lower high price of a bit more than $1800 and has fallen by 65% at one point of time to reach $600. However, the fact that it remained one of the Top 10 crypto coins for four years after the ICO or Initial Coin Offerings craze in 2017 makes Ripple one of the most time-tested crypto coins in this space. Different crypto experts have different predictions about its price. Some say it will stay around $5 till 2025 while others say that they believe it will reach the $10 mark and even surpass it to touch $20 by then.
  • Polygon or MATIC price predictions: From a low $0.03 and reaching close to $3 by, prices of MATIC fell by almost 50%. However, it represents the blockchain of the next generation that provides Layer 2 scaling solutions to allow high transaction output. Experts believe that the price of this coin will surely increase as more and more users enter into the crypto space and look for better services and solutions. A few bullish crypto experts envisage a rise in demand for MATIC and its price rising up to $10 in the next five years which may even cross $20 after that, they believe.
  • Cardano or ADA price predictions: The price of ADA increased up to nearly $3 before it dropped to under $1 at the start this year. Last year, the coin witnessed the execution of the Alonzo Hard Fork as well as an overture of more than a few new projects. In spite of this, ADA seems to struggle continuously to reach the mainstream because none of the new projects launched could impress much. As a result, the crypto experts believe that the price of ADA will hover over low $5 for the next five years after which it may reach up to $10. Well, a few other experts opine that over time the price of ADA may fall well below $1 especially if it cannot achieve mainstream adoption eventually.
  • Litecoin or LTC price predictions: The price of LTC got close to $400 in 2021 when it surpassed its 2017 high marginally. After that, the price of Litecoin fell by 75% to reach $100, though for a very brief period. The good thing about this coin, or the team behind this coin to be precise, is that they keep on improving the speed of the network and reduce the cost and make the blockchain much safer overall. These updates make it quite attractive and experts think that it will have a modest growth rate in the following five years to be traded at eventually anywhere between $200 and $300.
  • Dogecoin or DOGE price predictions: This was once a joke coin but now it is one of the most valuable and hottest crypto coins in the world. Its price reached an all-time high of about $0.70 in 2021 as it reached the mainstream due to its lovable and cute mascot as well as support from Elon Musk. Experts believe that there is no stopping DOGE now with its support from Elon Musk and being accepted as a payment mode by Tesla. Even though it is trading 80% off as of now from the all-time highs, several experts believe that it will soon cross the $1 mark once it enters into the mainstream territory.
  • Shiba Inu or SHIB price predictions: This coin witnessed an exorbitant rise in its price last year propelling to $0.00008 from $0.00000004. This coin has a direct tie with Vitalik Buterin, who burned over 410 trillion of these tokens once and then donated a large amount in these coins during the pandemic caused by coronavirus. With such associations, experts think that the value of SHIB will rise even further in the following years.
  • Binance Coin or BNB price predictions: This coin, which is used within the Binance platform and beyond, the price of BNB increased to $700 in 2021. However, after that the price of this coin dropped down to under $400 by more than 40%. In spite of this, BNB has a lot of potential to reach mainstream and will play an important part in buying, selling, and trading crypto. Its future looks very bright and experts think that it will be used for settling transaction fees, loans, travel expenses, and more. With such possibilities, its price is likely to be well over $1000 and the experts think that it may even be worth more than $2000 in the next five years.
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Remember, these are just a few major crypto coins that are discussed.

There is a high chance that the prices of all other crypto coins will also continue to rise, and also fall at the same time depending on the prevailing market situations.

Price rise will happen as the blockchain technology and crypto both continue to develop and come with newer and better features, capabilities, and functionalities.

With increasing mainstream adoption in the years to come, the overall demand for crypto will rise and people will start including this new digital asset class to their investment portfolios.

This will increase its price, knowing that it comes with a limited supply.

Chances to Bounce Back

Well, since prices of crypto will fall, you may naturally wonder what the probability of it to recover is or how soon it will bounce back from after the prices drop significantly.

Well, you are not the only one asking this question.

It seems to be in the minds of every crypto trader and investor, especially those who have stepped into this field recently.

Though it is quite difficult to indicate a specific time or a timeframe most accurately here is the best possible answer to it which will help you to decide whether or not you should stick to crypto.

Ideally, there are different answers to it and it is based on the diverse opinions that people possess about crypto.

Therefore, it is best for you to consider your individual circumstances.

Instead of answering the question with reference to every different crypto coin in particular, it is based on Bitcoin which ideally, is considered as the standard for most of the crypto coins.

After the crypto market crashed on 19 May and 8 June last year and the price of Bitcoin plummeted, it recovered and its value surged by as much as 255.65% by the end of the year.

Historically, the overall price of Bitcoin has increased by as much as 65,800.91% since February 2014 after crashing several times till this year.

Therefore, you can make a wild guess considering its recovery rate in these 8 years.

At this rate, the price of Bitcoin has reached nearly $70,000 from its low $40,000 surviving the fundamental as well as other allied onslaughts of the crashing crypto market due to several reasons as mentioned above.

However, everything depends on the buying and selling spree of the users which can set a new run always and create a new record high price.

Whether it happens in the short terms, midterm or in the long term will depend on the prevailing market conditions.

That is why you should follow the rule of thumb of savings and investments while investing in crypto that says you should not invest in anything if you do not understand the market very well.

Typically, research is the key to understanding the volatility of the market which is important to ensure that you do not lose your money even when the crypto market crashes.

However, it is for sure that you can predict crypto prices by analyzing different price charts and market signals which is important to know the probabilities and outcomes.

Conclusion

Investing in crypto is a matter of personal choice and should not be done if you do not have a high risk appetite and are not prepared to lose the amount invested.

However, with proper price prediction, now that you know it can be done, you can minimize losses.