Bitcoin is still moving around 30,000. hole. Will the cryptocurrency sector face another winter?


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Bitcoin is still moving around 30,000. hole.  Will the cryptocurrency sector face another winter?The cryptocurrency sector is again showing weakness at the end of the week. While Bitcoin itself is still trading around $30,000, the growing uncertainty is certainly not conducive to smaller cryptocurrencies. Altcoins like Chainlink or Cardano are losing several % today, despite some slight volatility. The crypto market appears to be “abandoned” by short-term investors, but is that really an argument for rising valuations?

Bitcoin continues to move with no clear direction. What’s next for the cryptocurrency market?

JP Morgan’s recent analyst report proving Bitcoin’s undervaluation and fair value of around $38,000 hasn’t caused the cryptocurrency’s valuation to surge, which has a huge problem breaking above $33. 000 usd.

Today is the day the next Bitcoin call options ($34,000+) will expire, which could increase volatility and lead to the liquidation of nearly $800 million in BTC. For a while, buyers have been anticipating a broader bounce, and Bitcoin’s rapid return above the $27,000 levels has encouraged the bulls.

During the boom of 2021, news like this caused sharp increases in valuations, but today the high risk is clearly not in the price. Cryptocurrencies show that they do not protect against “inflation” and a decline in the purchasing power of fiat money. Weak investor sentiment limits demand for digital assets.

In previous cycles, crypto market declines typically lasted around 2 years and ended when Bitcoin was waiting for another halving (a decrease in supply and miner rewards for the mined block). So far, the halving has happened every 4 years or so, and each time has resulted in a euphoric increase in the popularity and valuations of Bitcoin and smaller projects.

The previous cycles ended each time with a total panic, during which few believed in the return of the industry to high valuations and to the favors of investors, now we are still far from such a scenario. At the same time, it is difficult to expect the sector to fall like this every time, especially given the involvement of institutions and the interest in the ‘bottom-catch’ of funds such as Andressen & Horowitz, which has allocated $4.5 billion to the cryptocurrency market. “opportunities” emerging in the bear market.

A more plausible theory is that the previous Bitcoin raid was indeed, beyond the technological basis of speculation, a “child of low interest rates” and the era of cheap money.

In the opinion of the president of the American investment fund Fidelity, Abigail Johnson, we are witnessing a “third winter of crypto-currencies”. Next to Cardano’s Charles Hoskinson and Gavin Wooda, this is another important person in the blockchain industry, confirming the bear market and indicating room for further declines. All of this likely points to the continued cyclical growth of Bitcoin and cryptocurrencies. The fund has been associated with the blockchain industry since 2014, when it started mining the first Bitcoins.

NDE

Johnson, however, remains optimistic about the long-term prospects for the adoption and use of cryptocurrencies, as past cycles have taught him patience. Eventually, Fidelity wants to offer nearly 20 million of its customers a bitcoin retirement plan under the US employee 401(K) plans. This has so far been criticized by the Department of Labor over concerns about the sector’s high volatility;

The turbulent situation in the market for “stablecoins”, i.e. cryptocurrencies that mimic the quotes of physical assets, for example the US dollar, has calmed down after the fall of the algorithmic stablecoin Luna UST. Investor fear was also sparked by the largest stablecoin, Tether, which temporarily lost its correlation to the US dollar by almost 5%. The USDC stablecoin, built by FinTech company Circle, has gained on the wave of fear.

Circle regularly reports physical reserves in dollars and the company’s balance sheet is audited. USDC capitalization has already reached nearly $50 billion, online payment giant Checkout.com has pledged to accept payments from customers in USDC. This can potentially accelerate the adoption of the stablecoin, which in the future could be supported by the so-called ‘network effect’.

Source: CNN Business
Source: CNN Business

The fear and greed index still shows fear but has managed to recover from extreme levels around 10 points. Historically, such times have generally proven to be a good time to buy, but have been able to persist for many months, making the indicator quite useful in determining general market sentiment and as a component of analysis, but in itself does not. indicate an imminent recovery.

We can see that the mid-May lows have been avoided, Bitcoin is up nearly 30% from the local low price of around $24,000. At the same time, demand encountered resistance in the area above $31,000 each time and ended its bid for growth with high volume declines. This is definitely a worrying signal for bulls. The quotations mainly move between the abbreviation 38.2 and 23.6 par. Fibonacci, which confirms that Bitcoin price is waiting for another big move up or down.

Bitcoin chart, H4 interval, Source: xStation5
Bitcoin chart, H4 interval, Source: xStation5

A drop below $29,000 may end up attacking new lows, the 61.8 and 71.6 retracements are not at historically significant levels for Bitcoin and may not withstand supply pressure. In turn, an upward move still cannot be ruled out, although less likely. It should be mentioned that in the past, price movements in the cryptocurrency market often took place on weekends or at the beginning of the week.

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