Bitcoin Recovers After 70% Drop but Not Out of the Woods Just Yet

Bitcoin dropped to $6,000 this week, a staggering 70% decline from the $20,000 high it reached in December. While it is seemingly recovering now, the worst may not be behind us just yet.

Bitcoin has had a spectacular rise, followed by a brutal drop to $6,000 this week, a 70% loss from its $20,000 all-time-high in December. However, the leading digital currency has since recovered, managing to bounce back to $8,450, but is it out of the woods just yet?

The last few months have been phenomenal for the crypto space since Bitcoin was making thousand-dollar jumps every few days, and it seemed like there was no stopping the craze that has taken the world by storm.

However, bulls gave way to bears in December, just before the holiday season, after Bitcoin reached its $20,000 all-time-high and subsequently dropped to just over $12,000 on December 22. It did recover to another high of around $17,000 early January, but continued to slide since then, reaching its lowest price since early November last year.

Is it the worst behind us now? Not exactly. Just because it bounced back from a bottom of $6,000 doesn’t mean Bitcoin is headed back to $20,000. There is significant resistance along the way, and the leading digital currency has to first cross over $8,500 and then $10,000 to actually signal a possible end to the bearish phase.

At the time of writing, Bitcoin has actually dropped back to the $7,500 - $7,700 range, and what seemed to be a possible bottom head and shoulder pattern is not really holding.

Even though the price seemed to be headed towards $5,000 earlier, the recent rally can be attributed to the CFTC and SEC’s meeting before members of the Senate Banking, Housing and Urban Affairs Committee on Tuesday, where the chairs not only discussed regulations, but also clarified that the regulatory bodies were not against cryptocurrencies or innovation.

Given how speculative and sensitive to news the market is, these statements, followed by a lot of hype on Twitter and Reddit have apparently helped rebuild a positive sentiment, which is likely to have driven the price back up – whether it will be enough to reverse the bearish trend is what remains to be seen.

We may see the price dip again and possibly close near the previous bottom or go lower before enough buyers come in to really reverse the trend. We may also see a year-long bear market with short rallies followed by corrections – it is all entirely possible.

If you’re in cryptocurrencies for the long-term, now might be a good time as any to buy and hold, especially considering the 70% discount from December highs. But those who bought at the top may not be so optimistic about the future at this point. What is important to remember at this time, and something that has been said again and again, is that investments in cryptocurrencies are very risky, and you should never invest what you cannot afford to lose.

That being said, if you’ve held through the dip so far, it may not be the smartest move to sell now, particularly because the industry is just getting developed. With new ICOs, positive regulatory news from the United States, institutional investment instruments and new projects entering the space, the cryptocurrency market cap is very likely to recover. In the short-term however, the correction may not be over just yet, at least until the Chinese New Year celebrations end, after which a large chunk of the market which left in January is expected to join.

Please note that nothing in this article is to be construed as financial advice. Neither the author nor the publication takes any responsibility for trading and/or investment decisions you make based on information provided herein or anywhere else on the site. Cryptocurrencies are highly volatile and you should never invest more than you can comfortably lose.