Bitcoin falls below $34,000
Crypto analyst @venturefounder tweeted that Bitcoin’s worst-ever decline was caused by miner capitulation, and when BTC falls below production costs, it faces the risk of miner capitulation. BTC was at risk of miner capitulation when it fell to $30,000 in June and is now at risk of $34,000.
For Bitcoin miners, the constant decline of Bitcoin is terrible for them. This is different from the near capitulation in June 2021, as the hash rate and mining difficulty hit record highs and miner profits are already thin.
Suppose miners turn on panic mode and lead to capitulation. In that case, it will further trigger a market crisis, which will continue to expand the downward trend, and the pressure on the market to continue to explore new lows will increase significantly.
Reasons for Bitcoin’s fall
From the perspective of market information, there are two main reasons for the decline of Bitcoin:
1. It is related to the expiration of Deribit put options.
The Bitcoin price has fallen to $39,219.82 recently, a 24-hour drop of 6.5%. Some analysis shows that this market decline may be caused by Deribit’s put option with a strike price of $39,000.
In addition, the macroeconomic setback also weighed on the bitcoin market, with the S&P 500 closing down 1.1%. The Nasdaq fell 1.3% over the same period. The Dow Jones fell 0.89%.
At present, global interest rate hikes and monetary tightening policies are imminent. The market demand for Bitcoin as a safe-haven asset may shrink, further expanding the negative trend of the market and increasing the downside risk.
2. Russia’s encryption ban has brought negative regulatory expansion.
The Central Bank of Russia has proposed a ban on the use of cryptocurrencies and crypto-mining activities within Russia, citing threats to financial stability, citizens’ well-being, and monetary policy sovereignty.
The global regulatory pressure is increasing. Prohibition and regulatory policies are frequent, and cryptocurrencies will face more significant policy pressure. Although reasonable regulation is good for the industry in the long term, the short-term bad will increase significantly.
The bearish situation widens
As the market decline continues to expand, the market generally believes that the cryptocurrency has started a bear market cycle. In this context, the value of Bitcoin has encountered a new round of questioning crises.
After recovering to the $43,500 level on Jan. 20, Bitcoin fell more than 13% in 24 hours, its lowest level since early August, U.Today reported.
However, in general, Bitcoin has effectively consolidated its position in the past 13 years of development, especially in this bull market; the entry of institutions has accelerated the mainstreaming process of Bitcoin and the listing of many encryption-related products, which further shows that the traditional market has accepted cryptocurrencies. At present, the traditional financial market accepts and promotes the further development of cryptocurrencies.
Mike McGlone, the senior commodities strategist at Bloomberg, said recent market volatility in 2022 highlights Bitcoin’s role in the current digital asset revolution.
Crash or rebound?
The current sharp decline has triggered extreme panic in the market, and many analysts believe that Bitcoin will usher in a significant collapse.
Peter Schiff reportedly tweeted that BTC has been falling reasonably quietly so far.
Gabor Gurbacs, head of digital-asset strategy at VanEck, believes that $30,200 will be a basic support level for Bitcoin. He tweeted: “Central banks print trillions of dollars, high inflation, and many don’t trust bonds. So upside/rebound may be Going crazy. The S&P 500 is down 8% from its all-time high; the Nasdaq is down 14% from its all-time high. And Bitcoin is down more than 50% from its all-time high. So if You’re allocating cash, and I think you should know which relative value trade is better.”
Some analysts believe that the current market environment also has the opportunity to bottom out:
On the one hand, once the unstable BTC holders are washed out, institutions will have greater confidence to return to the market.
On the other hand, if the stock market rebounds, the crypto market may usher in a turning point.
According to U.Today, Galaxy Digital CEO Mike Novogratz earlier predicted that Bitcoin could fall to as low as $38,000 as institutional investors prepare to hunt for the bottom in the 2022 sell-off. Novogratz believes there has been a sizeable sell-off in cryptocurrencies right now, and some buying support is emerging. However, he gave one condition under which this could happen – a stock market rally: “It will be difficult for cryptocurrencies to bounce back until the stock market finds a foundation.”
On-chain analytics firm IntotheBlock has analyzed and predicted that Bitcoin will face price pressure in the coming months and has hinted at a price range of $38,900 to $40,200.