How low can Bitcoin go?
Market analysts, including BitMEX co-founder Arthur Hayes and Mobius Capital Partners co-founder Mark Mobius, said that the next target for bitcoin is $10,000, which, if the forecast comes true, will cause even more pain to the already suffering industry.
A few weeks after the collapse of the VTEX cryptocurrency exchange, shock waves are still being felt, as the Block-Fi credit company became the latest victim of the spread of infection on Monday
Other major companies, such as Genesis Global and Gemini, have also come under increasing pressure, raising concerns about new victims in the market.
However, one of the heaviest blows inflicted by recent events has been the undermined trust in the entire crypto industry. This, of course, had a negative impact on the price of bitcoin, which fell from over $21,000 at the beginning of the month to the current level of just over $16,000.
But is it really all gloom and doom for the world's leading cryptocurrency?
"Bitcoin seems to have found a level of support after the collapse of the FTX at around $16,000. "We are actively monitoring the consequences of FTTx — in particular, the potential bankruptcy of Genesis and further ripple effects from it," said Junyang Chan, head of research at kuenjikou.
Another area that is being closely watched, according to Yang Chan, is the "evolving situation" where bitcoin miners are selling their reserves for cash flow.
"In a broader sense, the ongoing difficult macroeconomic environment, as well as the geopolitical conflict in Ukraine, may cause greater volatility of bitcoin in the near future," he added.
Juan Pelliser, head of research at intotheblock, seems to be more optimistic, saying that "a rapid decline to the $10,000 to $12,000 level looks extreme unless a very negative catalyst appears."
"I think the general feeling is that there are more opportunities for growth than for decline, but it may take a long bear market of 12 to 24 months to restore investor confidence and absorb the impact that such large bankruptcies usually have on the sector," he said.
According to him, "the thesis about the value of bitcoin is more true than ever, and long-term traders are taking advantage of this, accumulating it at a rapid pace.”
As the data provided by intotheblock shows, bitcoin addresses that have been held for more than a year are currently at an all-time high, with their total balance accounting for 13.79 million bitcoins (about $225.8 billion at current prices).
Bitcoin and macroeconomic factors
The current macroeconomic environment is another factor that should be taken into account, as noted by Jason Pagoulatos, market analyst at Delphi digital, although he said that he personally had been focusing on the range from 9,000 to 12,000 for several months.
"From the point of view of macroeconomics, this is the worst background in more than 50 years, combining many factors of previous economic crises — inflation, energy, technological values, household values — in one year," Pagoulatos told the decoder, adding that there will be no sustained relief in cryptography "as long as the macro-flow does not it will end up upside down.”
According to Pagoulatos, historically different cycles can take a long time, and you simply cannot "loosen 14-year monetary policy in 12 months.”
"Liquidity rules the world and is the biggest driver of asset prices across the board. Until liquidity conditions recover, it will be difficult," he said.
It is believed that the Fed, which kept the federal funds rate at around zero in the 1st quarter of 2022, but has raised rates six times since then, is likely to abandon policy tightening sometime next year, most likely by the end of the second quarter.
This should strengthen liquidity conditions in general; however, as Pagoulatos warned, "stock markets historically tend to fall in the final stage after the implementation of the reversal, before the reversal.”
"Interestingly, the story of 2022 was a story of inflation, and I think 2023 will be a story of recession," he added, referring to the fact that this year the Fed tightened policy at the fastest pace in history.
According to Delphi's digital analyst, there is a high probability that risky assets will have a strong return in the second half of 2023.
The most important - and long-term - question is what inflation will be like when this axis appears, and whether it will cool down after the introduction of the axis.
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