Bitcoin price prediction: Another bitcoin price drop in early March

janet yellen bitcoin

Inroduction

The cryptocurrency craze has turned these soaring stocks into unsustainable valuations.

For months, the hottest investment on Wall Street has been an asset you won't even find on Wall Street: Bitcoin (CRYPTO: BTC). Last Friday, February 19, Bitcoin rose above $ 56,000 per token, pushing its market value north of $ 1 trillion for the first time.

Read Also: Bitcoin drops 10% after Elon Musk said prices appear high

Why another March crash isn't a possibility for Bitcoin

What happened: The price of Bitcoin (BTC) witnessed one of its most significant gains since its inception in February, as the cryptocurrency rose from $ 33,000 to $ 58,000 during this month alone.

However, according to the historical data, this trend may be set to reverse intraday as the month of March approaches.

Data from Bybt's cryptocurrency exchange data aggregator shows that Bitcoin typically crashed during March.

Why it matters: The majority of industry supporters have an optimistic view of Bitcoin's price, with some even revealing a price target of $ 100,000 at the end of the year.

However, if the historical data is to be believed, investors may begin to see short-term losses in the long positions they entered this month.

Some analysts believe that this cyclical drop in the bitcoin price is due to tax reasons. Incidentally, March also happens to be the month when most crypto market crashes occur.

The biggest crash was undoubtedly noticed in March 2018, when Bitcoin plunged more than 32%, followed by the March 2020 crash triggered by the pandemic-related panic selling.

The meltdown in March 2020 resulted in the liquidation of more than $ 1 billion in futures contracts, adding to the uncertainty in the market.

What else: While a crash appears unlikely at this point, some analysts in the chain don't think it's likely to see a drop in Bitcoin's price in the coming months.

There are few convincing reasons to believe this includes the new institutional interest in and support of Bitcoin, along with its declining affinity for gold.

In addition, reserves on exchanges decreased dramatically in 2021, compared to previous years when they were flooded with bitcoin for sale.

Bitcoin stocks could be disrupted by 31% to 66%, according to Wall Street

For more context, the best performing US index since the bearish market low on March 23 is the high-tech Nasdaq composite index, which has doubled in value. Meanwhile, Bitcoin's price increased by 777% during the same time frame.

Bitcoin is a basket of catalysts

Bitcoin has a basket of stimuli, both old and new, that pushes its valuations into the nosebleed. This includes the traditional argument that it will help fight the natural devaluation of fiat currencies as the global money supply increases. 

Moreover, more than ever companies are accepting Bitcoin as a form of payment in the United States and around the world.

Recently, the world's largest cryptocurrency was wearing the coats of Tesla CEO Elon Musk, who was not shy about supporting Bitcoin on Twitter. Tesla also recently acquired $ 1.5 billion of Bitcoin, which will be added to the company's balance sheet.

However, not everyone on Wall Street is on the crypto train. There are currently three companies that could lose anywhere between 31% to 66% of their value if their one-year target price estimates for Wall Street prove to be accurate. 

This list would likely be much longer if more Wall Street analysts released price targets for cryptocurrency stocks.

will bitcoin crash again

MicroStrategy: Implicit downside 66%

The largest-ever drop is expected from MicroStrategy enterprise intelligence (NASDAQ: MSTR).

If Wall Street's agreed price target is correct, MicroStrategy will lose 2-thirds of its value over the next 12 months. For reference, stocks rose 556% in the next 12-month period.

The euphoria surrounding MicroStrategy concerns its CEO, Michael Saylor, who deals with his company like a bitcoin tracking indicator.

According to the company's fourth-quarter operating results, it acquired nearly 32,200 Bitcoins in the fourth quarter for $ 700 million and spent another $ 10 million buying 314 tokens in January.

As Bitcoin's price rose, MicroStrategy's Bitcoin heavy balance sheet pushed its share price significantly higher.

Moreover, MicroStrategy completed a $ 1.05 billion issue of convertible bonds just days ago, with estimated returns of $ 1.03 billion, minus expenditures.

This billion dollars is expected to be used to purchase additional Bitcoin. It's worth noting that the company issued $ 650 million in debt a few months ago and used the money from this capital increase to acquire Bitcoin.

Al-Add sees it as a very irresponsible move on the part of Saylor and his administration. Investing a portion of unnecessary company funds in Bitcoin is one thing. 

It is another thing to issue approximately $ 1.7 billion in convertible debt for the sole purpose of purchasing a highly volatile and unproven asset.

As for the company, its full-year sales have declined steadily since 2015. MicroStrategy has been giving up innovation and playing a dangerous game that is chasing Bitcoin with money it doesn't have. I think Wall Street's suspicions are justified.

Patent Marathon Group: downside implicit by 31%

Another stock that Wall Street dislikes is the mining company Marathon Patent Group (NASDAQ: MARA). If the Wall Street consensus goal is accurate, Marathon stock price could drop by nearly a third over the next year.

Cryptocurrency mining involves the use of high-powered computers to solve complex mathematical equations that validate a set of transactions (known as a block). The reward for doing this on the Bitcoin blockchain is 6.25 tokens, currently valued at $ 350,000.

Thus, one of the best selling points of owning a Marathon Patent Group is that a higher bitcoin price will yield more attractive block rewards. When fully operational in the first quarter of the fiscal year 2022, it will have 103,060 miners.

Another catalyst is that Marathon Patent Group bought 4,812.66 Bitcoin in late January for a total price of $ 150 million. This amounts to approximately $ 31,168 per icon.

The concern is that Bitcoin is highly volatile, and has historically plunged into multi-year bear markets after bursting peaks as we see them now. 

This could put the company's Bitcoin holdings under pressure, and that would be a major disadvantage for Marathon mining operations.

Additionally, bearing in mind that Marathon mining operations are still relatively nascent, the company generated only $ 1.7 million in sales during the first nine months of 2020, with operating losses practically doubling to $ 4.9 million. That's $ 4.1 billion in corporate income.

Riot Blockchain: Downside implicit at 61%

Wall Street at the Bitcoin Final Exchange believes that you should avoid, at least based on the agreed-upon price target for one year, the cryptocurrency miner Riot Blockchain (NASDAQ: RIOT).

The riot ended last week at $ 71.33 a share, but its price target is only $ 28. For math phobia out there, that's an expected 61% decline.

Similar to Marathon, Riot Blockchain's strategy is to acquire new mining equipment and earn Bitcoin block rewards.

But unlike Marathon, no investments have been made in Bitcoin. In other words, Riot is totally dependent on the ebb and flow of the world's most famous cryptocurrency.

Instead of letting innovation deliver results, management has to cross their fingers and hope Bitcoin will head higher, a dubious offering of a highly volatile digital currency.

Like most miners, Riot's results leave much to be desired. During the first nine months of 2020, the company generated only $ 6.7 million in revenue and made a $ 16.6 million net loss. This matches how much money you lost during the nine months of the previous year.

According to one Wall Street estimate, Riot is expected to generate $ 158.6 million in sales in 2021. That is an increase of more than 1,400% from 2020. Until then, it will be worth 30 times the sales. That's insanely high for a company that relies on bitcoin, not innovation.