The price of Bitcoin fell below US$18k, a new sign the selloff in cryptocurrencies is deepening.
People were still recovering from the dramatic crypto crash of Terra LUNA and now the drastic fall in Bitcoin seems like a nightmare for many crypto investors. Bitcoin (BTC) is the topmost cryptocurrency in the entire market with high volatility. Since the most popular cryptocurrency in the market has only shed more than 70% of its total value, since hitting its all-time lows, it can only be imagined where the crypto market, as a whole will stand in the upcoming years. On Sunday, the leading cryptocurrency dropped below US$18,000, and the price of top cryptocurrencies declines by as much as 35% last week in the wake of economic recession fears. Bitcoin’s price drop is the latest sign of turmoil in the crypto industry amid wider turbulence in financial markets. The majority of crypto investors are selling off riskier assets because central banks are raising interest rates to combat quickening inflation.
The crypto crash of Bitcoin since May 2022
You must be highly aware of the fact that the global cryptocurrency market cap has fallen down the US$1 trillion mark. It is unbelievable for crypto investors to experience this drastic crypto crash. After all, Bitcoin going down from US$68k to US$18k is way too much to take for anyone. This is the first time since November 2018 that the Bitcoin reading of the indicator has dropped down the 30 thresholds.
Bitcoin crypto crash happened due to multiple reasons such as the Celsius Network (CEL) took a fall of 70%, the US inflation rate has raised to 8.6% while affecting the economy with a massive sell-off on the weekend, and many more.
It has been speculated that the BTC price will hit US$10k in 2022-2023 as the worst-case scenario for the entire community of crypto investors and tech companies relying on this cryptocurrency for payment transactions. The prediction is that after hitting the rock-bottom level of US$10k, Bitcoin may turn around for a comeback while reaching the US$50k zone.
Cryptocurrency experts have started mentioning that the tightening of Federal Reserve policy — raising the target for the federal funds rate to the range of 1.5% and 1.75%, as well as the shrinking of the balance sheet will create a huge impact on the change in BTC price. The transactions are paused and slowed down for the overflow. Thus, Bitcoin can push forward its price towards the US$10k zone, surpassing the current US$20k price level. Bitcoin crypto crash is experiencing a bear market with the downfall of the global economy. Long-term crypto investors are on the verge of selling their digital currencies, despite incurring a huge loss.
“If #Bitcoin can collapse by 70% from US$69,000 to under US$21,000, it can just as easily fall another 70% down to $6,000. Given the excessive leverage in #crypto, imagine the forced sales that would take place during a sell-off of this magnitude. $3,000 is a more likely price target,” tweeted Chief Economist & Global Strategist, Peter Schiff.
Bitcoin Fall: Result of Macroeconomic environment?
Currently, Bitcoin is below US$18K since the global crypto market fell due to the various macroeconomic environment and systematic risks inside the crypto space. BTC fell for 12 straight weeks. The crypto was staged at around US$49K and fell below US$18K. Even though it showed certain signs of bottoming out in mid-May and also during the beginning of April. But investors are extremely worried about the inflation data, which is, in turn, causing them to sell off their crypto investments and are moving towards more traditional and centralized assets.
Given the current macroeconomic environment, and the Federal Reserve tightening the interest rates, crypto investors are afraid that the prices may fall further. Companies that have adopted digital assets are once again preparing for both recession and ‘crypto winter’, or when the prices further fall or to cope with the fact that the crypto prices have stayed so low for such an extended period. Experts advise investors to check on their asset allocation and are also recommending utilizing Bitcoin for only a smaller part of their investor portfolios.
“In the next 670 days, BTC will capitulate in the next 6 months and hit cycle bottom ($14-21k), then chop around $28-40k in most of 2023 and be at $40k again by next halving,” tweeted Venture founder, a contributor at on-chain analytics platform CryptoQuant.
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Bitcoin: On-chain metrics to consider in this bear cycle before going…
The crypto market has had quite a ride this month after bearish waves struck down major cryptocurrencies. The global crypto market capitalization also fell below $1 trillion leading to failing crypto institutions such as 3AC and Celsius. Bitcoin also suffered heavy drawbacks during the period.
BTC reached its lowest levels since December 2020 after dropping below $17,750. Starting the month at around $32,200, the largest-sized crypto has taken a lot of heat and at press time, it was trading at $21,000. The king coin was up by more than 2% in the past day and was just down 0.05% during the week. This was a good signal of recovery after treading through bearish downturns early in June.
Nearing market bottom
On-chain data analytics platform CryptoQuant released the latest update surrounding Bitcoin. It stated that the current BTC price is undervalued. Most on-chain indicators indicate that we are close to a market bottom for Bitcoin.
BTC’s indicator of Net Unrealized Profit/Loss was hovering around -0.06, at press time. This is the initial signal for nearing a market bottom. In the latest crypto crash, there were many addresses that recorded losses when BTC reached the 18-month bottom of $17,744.
According to CryptoQuant, the MVRV ratio has fallen significantly during the current run. At press time, it was estimated at around 0.93, suggesting an undervaluation of BTC.
There was, however, a little spike in Miner’s Position Index but it was still estimated at -0.6. This means that miners are circulating more than their daily distribution in the moving average of the YTD.
Miners have also increasingly offloaded their holdings to exchanges. This can indicate that some miners’ revenue cannot meet the break-even point.
For many investors, this is a good time to start accumulating again if they want to recoup their losses. With the regulatory proposal for digital assets already in place in the United States, there is still hope for a bullish surge in the coming months.
Bitcoin Whale Presence On Derivatives Still High, More Volatility Ahead?
On-chain data shows Bitcoin whales are transferring large amounts to derivatives exchanges right now, a signal that more volatility could be ahead for the crypto.
Bitcoin All Exchanges To Derivatives Flow Continues To Show High Value
As explained by an analyst in a CryptoQuant post, BTC whale activity on derivatives exchanges still seems to be high.
The relevant indicator here is the “all exchanges to derivatives exchanges flow,” which measures the total amount of Bitcoin moving from spot exchange wallets to derivatives.
When the value of this metric spikes up, it means whales are currently moving a large number of coins to derivatives exchanges right now.
Such a trend usually occurs around lows in the price of the crypto as whales look to get themselves long positions.
Related Reading | Bitcoin Recovery Slows Down As Whale Inflows Remain Elevated
On the other hand, low values of the indicator show whales aren’t moving much coins to derivatives at the moment. This kind of trend has historically lead to tops in the value of the coin.
Now, here is a chart that shows the trend in the Bitcoin all exchanges to derivatives flow over the last couple of years:
Looks like the value of the metric has been quite high recently | Source: CryptoQuant
As you can see in the above graph, the Bitcoin spot to derivatives flow has spiked up recently, suggesting that whale activity is pretty high right now.
In fact, the current value of the indicator is actually the highest ever in the history of the cryptocurrency, implying there is an all-time high rate of whales on derivatives currently.
Historically, the price of the crypto has observed significant volatility whenever the metric’s value has been elevated.
Based on this trend, the quant believes that the value of the coin could still see further fluctuations in the near future.
The analyst also notes that a reduction in the all exchanges to derivatives flow will need to be there, for the volatility to die down.
At the time of writing, Bitcoin’s price floats around $21.1k, up 4% in the last seven days. Over the past month, the crypto has lost 27% in value.
The below chart shows the trend in the price of the coin over the last five days.
The value of the crypto seems to have surged up over the last couple of days | Source: BTCUSD on TradingView
After hitting a low of below $18k a week ago, Bitcoin has been trying to recover. So far, the crypto has managed to break above $21k again, but it’s yet unclear whether this recovery will last.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
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I’m Tony Spilotro. Behind the pseudonym, I’m a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck – literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn’t yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can’t yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.
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