Due to the fact that Bitcoin tends to follow derivatives rather than spot market trends, options and futures contracts are two major drivers in its price creation process. The expiration of options, on the other hand, has no direct impact on the price; instead, the maximum pain price of options might serve as a guide for spot traders. However, Bitcoin price witnessed a fall on New Year’s Eve and both factors were not regarded as a contributor.
In this article, we would be examining how New Year’s Eve affected bitcoin price and every other thing you need to know as the leading cryptocurrency attempts to get back on its feet.
How Bitcoin Price Fell on New Year’s Eve
Bitcoin soared to new highs in 2021 as more investors, particularly large Wall Street firms, got interested in it as a potential speculative asset or a hedge against rising prices. Other positive developments, such as the establishment of the first U.S. exchange-traded fund that tracks Bitcoin futures, have also contributed to the cryptocurrency’s rise this year. Through November, more than $20 billion was invested in crypto exchange-traded products globally, a new high. Assets have increased by approximately 550 percent year-on-year, from $3.1 billion at the end of last year, according to the corporation.
Bitcoin, the most valuable cryptocurrency in terms of market capitalization, fell 19 percent in December, its largest monthly loss since May. It was also the worst December since the coin’s inception in 2013. And its 60 percent increase in 2021 was the slowest year-over-year increase since 2015, when it was 36 percent. The coin fell by up to 3.5 percent before recovering slightly to trade at around $46,300.
However, it is no longer debatable that Bitcoin had a breakout year after spending 2021 pushing further into the mainstream and attracting greater attention from finance professionals and the general public.
With a “green day” and a nearly 3% price increase, Bitcoin began the year 2022 with a “green day.” However, the largest cryptocurrency on the market has dropped 30% of its value since its all-time high, which is bad news for crypto investors. Bitcoin experienced many bear and bull cycles throughout the year, resulting in both strong recoveries and corrections. Bitcoin price also traded at levels similar to those seen in September, April, and February.
Some traders believe that the market’s sudden buying power is the result of a long-awaited technical comeback in a severely oversold market. The underlying reason is the December options expiration, which has a maximum pain price of less than $47,000. After the previous options contracts expire, the market’s primary tool for hedging positions, or “wagering,” on the next Bitcoin price in the specific period becomes the next options contracts.
What Bitcoin Price Fall Means for The Future
Bitcoin began 2022 nearly twice as valuable as it was in January 2021, capping a year in which cryptocurrencies exploded in popularity and curiosity among the general public.
These crypto newcomers are affecting the once-peripheral crypto scene and shifting the needle toward mainstream use, in addition to institutional adoption and government regulatory interest. In the last 12 months, 51% of Americans who hold cryptocurrency purchased it.
Despite its recent record high, Bitcoin remains a highly volatile and speculative investment. So, in light of this latest rise and subsequent declines, what should crypto investors do? Given the cryptocurrency’s history of volatility, this surge does not ensure a long-term reversal, Bitcoin’s price is equally prone to drop as it is to rise.
Despite the long-term price of Bitcoin having roughly doubled since January 2021, it has been volatile this year. In the first half of 2021, Bitcoin soared to an all-time high of nearly $64,000, only to plummet to below $30,000. In November, Bitcoin reached a new all-time high of over $68,000. Some experts predict that the price of Bitcoin will approach $100,000, stating that it is a matter of when not if.
Bitcoin price is expected to hit $100,000 by 2023, according to conservative projections, but more bullish crypto aficionados believe $250,000 is within reach. Major financial organizations are also weighing in on the discussion, with JPMorgan forecasting a long-term high of $146,000 and Bloomberg forecasting a price of $400,000 by 2022.