Bitcoin investors buy the dip as BTC falls below $40K

Bitcoin’s price, which has been in a downward trajectory since 2022 started, fell below $40,000 on Monday. Despite the decline, many investors bought the dip as they continue to stand by the crypto’s long-term potential.

Bitcoin fell to as low as $39,816.94 during Monday’s trading based on CoinMarketCap data, its lowest since August 2021. At that point, BTC’s price is down around 40 percent from its all-time near $69,000 set in November last year.

Markets suffered as investors expect the Federal Reserve to more aggressively due to rising inflation pressures, according to Kitco.com. Many anticipate that tighter U.S. monetary policy drying up liquidity and are unloading some of their volatile investments.

“Bitcoin and Ethereum got knocked down early as Treasury yields surged as expectations remain strong that inflation will not ease anytime soon, prompting the Fed to deliver more than a few rate hikes this year,” OANDA senior market analyst Edward Moya said.

Some crypto investors are taking advantage of the price drop and are buying Bitcoin’s latest dip while others are waiting for the crypto’s price to consolidate. While BTC has declined since the year started, many are still optimistic about the crypto’s long-term potential. “Short-term volatility will remain elevated for Bitcoin and Ethereum, but for long-term hodlers, the outlook still looks bright,” Moya added.

Meanwhile, Bloomberg Intelligence senior commodity strategist Mike McGlone acknowledged that BTC could slide further and might test the $30,000 support. However, he also opined that this scenario is unlikely to happen and that the crypto’s price is likely to recover and rise higher.

“A risk-off swoon like that of 2020 may put those key supports in play but is unlikely,” he said. “What's more probable, we think, is Bitcoin heading toward $100,000 and Ethereum breaching $5,000 resistance. A key issue we see is the Federal Reserve, as it faces the greatest inflation in four decades, more inclined to raise interest rates if risk assets continue climbing," he said. "We see the Bloomberg Galaxy Crypto Index marching higher in 2022, but among the riskiest of assets, cryptos must manage Federal Reserve tightening.”

Indeed, Bitcoin managed to recover quickly from Monday’s drop. At the time of writing, BTC traded at $42,160.87 based on CoinMarketCap data.

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