Bitcoin price fluctuations have been giving investors and traders hope and then, pushing them back to the feeling of the devastation and mistrust. 3 AC, one of the major hedging fund funds working with crypto has filed a bankruptcy claim under Chapter 15 of the U.S. Bankruptcy Code but the Singaporean authorities initiated an investigation with claims that the company has broken a number of laws under the legislation of Singapore.
This event was followed by Voyager Digital, one of the major crypto brokers, freezing all trades and withdrawals in crypto.
Celsius, one of the major crypto lending platforms, has frozen all withdrawals, and for now, there is no recovery sign.
FTX provides a $250 mln emergency line credit to BlockFi and is close to the purchase deal.
Vauld, another crypto lending platform, finally freezes all the withdrawals and deals after multiple assurances that the platform has over $ 1 bln of assets in stock and whatever the circumstances are, it will continue to operate as usual.
What’s going on?
We all know that cryptocurrency is a highly volatile asset and the platforms that deal with it have their major stock in BTC and ETH. During the last 3 months, the Bitcoin value dropped by more than half from approx. $46,000 to slightly above $18,000.
It means that if a company had $1bln in BTC, suddenly, the value of its stock dropped to less than half of a million. It cannot be overcome so easily, and if the company was not prepared for it (the majority were not even though many specialists forecasted the coming crypto winter), the consequences are very hard to manage.
The mentioned companies have to face the consequences, and because they are among the major players in the market, their collapse or insolvency pulled the market down, with crypto prices falling even more.
Now, when you know how the Terra crash and the further drop in BTC price could cause such a mess in the market, you may want the main question to be replied to: where is Bitcoin heading now and what to expect further?
Inflation and Consumer Index
The inflation has risen to 8.6% in the USA in May 2022 which is the highest indicator since 1981.
The most affected was the energy sector.
The levels are much higher than expected. It happened because of the war in Ukraine and sanctions imposed on Russia. As long as the war is going on, no improvements are expected. On the contrary, it is clear that the prices will be growing at a high pace and thus putting more pressure on the financial market in general and on the crypto market specifically.
Resistance and Support
June was a difficult month for BTC. It was marked by an abrupt and sudden increase in the coin value and drops. However, everything was within the limits dictated by the market. The coin has not exceeded the psychologically crucial limit of $20,000 and has not dropped below the support level of $17,500. On Independence Day, the coin value almost touched the level of $20,000 but a drop followed, and this level has never been crossed.
It means that right now, we cannot expect the coin to grow in value.
What about the next drop then? Bulls were trying desperately to pull the BTC price below the support level of $17,500 but haven’t managed to do so. We still can expect the coin price drop but for now, no fast decrease is expected.
But if the value drops below $17,500, the nearest support level is at $14,000. It means that after crossing the $17,500 mark, there is nothing to hold the BTC from the abrupt decline to $14,500. We hope though that it won’t happen, and there are several indicators to believe in it.
Bitcoin Mining and Miners’ Behaviour
Another thing to consider when checking the coin health and further perspectives is the mining hash rate chart.
If you have a look at the general trend, without considering drops within 1-2 days, you will see that it is increasing, as well as the mining difficulty. It means that more miners are joining the network. Miners are the core of any PoW blockchain, and in this regard, Bitcoin feels fine. The increase in the hash rate is a positive sign as long as the surges are not soo sudden.
Another indicator to consider is the number of BTC sold by miners.
In May, this value surged. We can derive it from the BTC price drop and the need to stay afloat by selling some coins. But if this trend continues, miners will be forced to sell out more BTC which can put pressure on the market and send the coin price even lower.
However, if miners start exiting the business, the network mining hash rate will drop, and it will open the doors to those who couldn’t afford big mining farms. To some extent, such a scenario is not the worst thing that can happen.
Bottom Line
Even though all indicators show that Bitcoin isn’t going to collapse completely, the crypto winter is just starting, and the way it is progressing is very harsh. There is no doubt that more companies dealing with crypto will be wiped out but it will demonstrate clearly what projects have value. Those are the projects worth investing in. Don’t forget that crypto is a very risky asset to invest in, and some specialists claim that this crypto winter is going to extend for more than one year. That’s why to invest those funds only that you can afford to lose.
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