Author: Joshua Aldio, Business Associate
Bitcoin appeared to stabilize on Sunday after an unusually harsh sell-off, but the largest cryptocurrency was still on track for its worst weekly performance in eight months. As of press time, Bitcoin (BTC) was changing hands just below $35,000, up 1.6% over the past 24 hours. More than $1.5 billion of Bitcoin trading positions were liquidated over the past three days due to margin calls, according to the data site Coinglass.
Crypto traders appear to be pricing in fear that in the coming months, the Federal Reserve will tighten monetary conditions that have been historically loose since the coronavirus struck the economy in March 2020. The Fed’s stimulus measures — which included printing trillions of dollars — were widely cited as a reason for Bitcoin’s growth in 2020 and 2021, including the ascent to an all-time high of $69,000 in November.
The latest shakeout left Bitcoin down by roughly half from that record price — a stark reminder of just how volatile cryptocurrency markets can be.
Bitcoin Technical Analysis
Bitcoin is falling towards $30,000; the chart shows us that BTCUSDT has broken the neckline of the head and shoulders pattern, signalling that the downward movement will reach the leg of the head and shoulders pattern around $30,000.
Fundamentally, Bitcoin still has a clear and bright future, as:
- Holders Continue to Grow — The number of addresses holding BTC are increasing
- On-Chain Activity Endures — The number of transactions taking place on Ethereum remains high
- NFTs continue to expand — As OpenSea reaches a $13B valuation, the leading marketplace is seeing a surge in demand with over $160M traded per day so far in 2022. Notably, famous Taiwanese singer Jay Chou’s collection PhantaBears has been the most traded collection this year, and showcases the potential for NFTs to continue growing into the mainstream globally.
- Increased adoption of DAOs — Decentralized autonomous organizations have been gaining momentum. ConstitutionDAO was arguably the first DAO to gain widespread coverage. A few days ago Steph Curry joined golf-focused LinksDAO. Peter Thiel backed the investment-oriented BitDAO. The wide range of opportunities that can be coordinated through DAOs and growing interest for them make it likely to be a positive driving force for crypto in 2022.
- Gaming onboards new set of users — Play-to-earn mechanics pioneered by Axie Infinity have the potential to attract a broad base of gamers into crypto. There were 3-5 funds raising $100M+ specifically for crypto gaming in 2021. As this capital gets deployed, we are likely to see the onboarding of millions of new users into crypto.
- Other potential catalysts — More countries adopt Bitcoin as legal tender, DeFi attracts millions of users as high inflation makes savings accounts irrelevant, stablecoins go mainstream following PayPal’s project or the release of Meta’s Novi (fka Libra) wallet.
“The bearish case is that due to high inflation expectations, the Fed may start tapering and increasing the interest rates, which will be a concern for all asset classes (including Tech Stocks and Crypto), but this is expected to be short-term”. says Christian Hsieh, CEO of Tokenomy.