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Bitcoin — and the larger crypto market — is down following the crash of crypto exchanges FTX and FTX.US. On Nov. 11, 2022, both exchanges filed for Chapter 11 bankruptcy. Because FTX had invested in so many crypto-related companies and cryptocurrencies, its collapse has far-reaching impacts on the larger market.
While Bitcoin has a history of recovering after crashes, such a recovery could take months or years. And if investors continue to sell, Bitcoin's price could go much lower before it comes back up. While unlikely, there's also a possibility that Bitcoin could go to zero following a massive sell-off.
The fallout from the FTX crash is ongoing. Crypto exchange BlockFi, which had received a line of credit from FTX.US and was set to be acquired by it later this year, filed for bankruptcy on Nov. 28.
If you're worried about keeping your crypto with an exchange, consider moving your digital assets to a separate crypto wallet. Most exchanges allow you to transfer assets to these wallets, which can be online (on a separate platform) or offline (on a thumb drive with added security features).
In general, what factors could cause Bitcoin to go up?
There are a handful of factors that could cause demand for crypto to rise:
A crash turns out to be more limited in scope than initially thought. Because so many crypto-related companies are financially entangled through investments and acquisitions, one exchange crash can trigger other companies and currencies to fall like dominoes. If that doesn't happen to the extent investors expect it will, prices might recover sooner. Inversely, a worse-than-expected fallout could stall recovery.
Lower interest rates. The price of riskier investments tends to rise with lower rates. Currently, the federal funds rate is higher than it's been for more than 10 years and rising as the Federal Reserve tries to beat back inflation.
Reduced threats of inflation and economic recession. If the Federal Reserve is successful in reducing inflation through raising interest rates, investors might have more appetite for investing in risky assets like Bitcoin.
Big investors getting into crypto investing (such as pension funds). Large purchases can nudge prices up.
Bitcoin price predictions: All over the map
Bitcoin is the oldest and most valuable cryptocurrency and is often used as a proxy for the price of cryptocurrencies. As a result, there's a lot of speculation about where the price will head next.
You can find a wide range of predictions on crypto blogs, Twitter accounts and YouTube pages. But you won't see many professional analysts setting price targets how they do for stocks. It's just too hard: J.P. Morgan's research from 2021 showed that Bitcoin is roughly five times more volatile than equities or gold and has "little to no correlation with other major financial assets."
Those who believe in cryptocurrency's long-term potential might say the question is not if prices will rise again but when. And "when" can mean many different things. For example, Bitcoin could come back as furious as it did in 2021, or it could be a multi-year recovery, such as after a drop in 2013.
It's also possible that prices could continue to go down rather than back up. Crypto winter is passing the one-year mark, and a drumbeat of bad news throughout the year, including the sudden fall of exchanges FTX and FTX.US, has dampened some hopes that an upswing is near.
How to respond to a crypto downturn
"In some ways, the volatility in crypto can accrue to the benefit of savvy investors," says Greg King, founder and CEO of Osprey Funds, a crypto investment firm. "It offers investors great opportunities to buy dips, tax-loss harvest and dollar-cost average."
Instead of hoping for a particular price in the near term, these strategies for investing in crypto in a down market rely on forming a plan and executing it over time.
The author did not have positions in Bitcoin at the time of publication. The editor owned Bitcoin at the time of publication.