Bitcoin (BTC), despite losing $20,000 last week, starts a new week.
It was impossible to believe that this could happen just weeks ago. However, $20,000 — the record high between 2017 and 2020 — now returns to investors with a grim sense de déjà vu.
Bitcoin fell as low as $17600 last weekend and tensions are high ahead of the June 20 Wall Street Open.
Although BTC price drops have been statistically significant in the past — and perhaps even more so — there are growing concerns about network stability at current levels. Miners are particularly being watched.
It is easy to understand why sentiment about Bitcoin and crypto has fallen to record low levels when you consider that macro markets are unlikely not to bottom.
Cointelegraph examines the major areas of interest to hodlers in relation to Bitcoin price action over the next days.
Bitcoin saves $20,000 in weekly chart
Bitcoin’s most recent weekly close was $20,580. However, the largest cryptocurrency managed at least to maintain a key support level on weekly timeframes.
However, the wick below was $2,400 and a repeat performance could increase the pain for those who bet on $20,000, which is a substantial price level.
Overnight, BTC/USD hit highs of $20629 on Bitstamp, before consolidating immediately below $20,000, which indicates that the situation is still precarious in shorter timeframes.
Prices should rise a lot now to punish panic sellers and forced sellers. At least half of the drop from Friday (CPI Day). From here, I expect a quick reaction. The best rallies don’t allow laggards to enter.
— Alex Kruger (@krugermacro) June 19, 2022
Some call for a quick recovery, but the general mood among commentators is one of cautious optimism.
“Over the weekend while the fiat railways are closed,” $BTC fell to $17,600, down nearly 20% on Friday due to good volume. It smells like a forced sale has triggered a run-on stops,” Arthur Hayes (ex-CEO of BitMEX derivatives trading platform BitMEX) said in a Twitter thread.
Hayes believed that recovery would occur as soon as the forced sales ended. However, more sell-side pressure could still be present.
Another post said:
“But, for skilled knife catchers there may still be additional opportunities to purchase coin from those who must whack all bids regardless of price.”
Since the May Terra implosion, the topic of crypto hedge funds’ and other investment vehicles’ role in exacerbating BTC market weakness has been a hot topic. The market may need to stabilize long-term with the addition of Three Arrows Capital, Celsius, and other chaos-inducing investors.
Investor Mike Alfred stated that “Bitcoin has not finished liquidating large players,” on June 18.
“They will bring it down to a level which will cause maximum damage to the overexposed players such as Celsius, and then it will bounce back and increase once those firms have been completely destroyed. This is a story that has been told since the dawn of time.
The $16,000 target is still very popular. This in turn only represents a 76% decrease from Bitcoin’s November 2021 all time highs. Cointelegraph reported that estimates are currently as low as $11,000 — an 84.5% drop.
“$31k-32k was broken, and used as resistance. Similar thing is happening with $20k-21k. Main target: $16k-17k especially $16,000-16.250,” popular Twitter account Il Capo of Crypto summarized.
It also described $16,000 as “strong magnet”.
BTC/USD 1-week candle chart (Bitstamp). Source: TradingView
Stocks and bonds are “nowhere else to hide”
The Wall Street open has a bleak outlook on equities, which means that there are no upside prospects for BTC as of June 20.
Analyst and commentator Josh Rager noted that the correlation between Bitcoins and stocks is still strong.
Equity futures are down Therefore $BTC follows https://t.co/pXih3MdbzZ
— Rager (@Rager) June 20, 2022
It seems that the stars are aligning for those with shorter attention spans. According to data as of June 18, stocks are in the “worst quarter” ever, with crypto markets offering investors a glimpse of the future months ahead.
There is no hiding place: Bonds and stocks are headed for their worst quarter in years. Credit markets are also suffering. #Bitcoin has lost over two-thirds of its value since it touched a high of nearly $70,000 in Nov. (via BBG) pic.twitter.com/CP3zmzhVTl
— Holger Zschaepitz (@Schuldensuehner) June 18, 2022
It seems as though the Federal Reserve and the central bank are the only market players capable of turning the tide.
Some now believe that tightening the monetary policy will not last as the negative effects of the Fed’s recent tightening will cause them to increase the supply of the United States dollars. This would result in cash flowing back to risk assets.
This perspective is shared even by the Fed in the event of a U.S. recession — something that has a high probability of happening depending on recent Fed comments.
In a speech on June 18, Christopher J. Waller, Fed governor, spoke out about the accommodative environment and ultra-low interest rates.
“I wish we never have to go through another two years like 2020 or 2021. However, because of the low interest-rate environment, I believe there is a good chance that we will still be making policy decisions similar to the ones we made in the past two years.
Policy dictates that rates will rise in the interim, which is the trigger for higher risk-asset losses, as announced earlier by the Fed.
Miners are not in the mood to capitulate
Who has been selling Bitcoin at the lowest prices since November 2020?
On-chain data tracks the investor cohorts that contribute to selling pressure — some forcefully, some voluntarily.
Miners who might be already underwater when it comes down to finding blocks have switched from buyers to sellers, stopping a multi-year-old trend of accumulation.
Glassnode, an on-chain analytics firm, confirmed that miners had spent approximately 9k $BTC from treasuries during the week and still have around 50k $BTC.
However, it is hard to accurately calculate the cost of mining, as different mines have different conditions and costs. Many may still be profitable, even at current prices.
Bitcoin does not have a low electrical cost, particularly for large-scale miners whose marginal costs are closer 10k to 20k. From @GalaxyDigitalHQ: pic.twitter.com/8iSvzZqCtT
— MAGS (@Crypto_Mags), June 18, 2022
BTC.com data, however, has some surprising news. Bitcoin’s network difficulty does not appear to be dropping in response to a miner exodus. It is expected to increase this week.
Difficulty is a key component of the Bitcoin network’s unique proof-of-work algorithm. It allows it to adapt to economic changes and provides the Bitcoin network with the ability to handle any unexpected events. In order to make mining more appealing, miners who lose profitability will automatically reduce difficulty to lower their costs.
So far, however, miners remain on board.
The hash rate is also at record levels, but still exceeds 200 exahashes per seconds (EH/s). The hardware power used for mining is at the same level as before.
Screenshot of the Bitcoin network basics overview. Source: BTC.com
Bitcoiners are either sellers or hodlers and they see “massive” loss
Glassnode states that both large and small hodlers were unable to weather the storm, but they suffered “massive” losses when selling.
Researchers noted that “if we assess the damage we can see almost all wallet cohorts from Shrimps to Whales now hold massive unrealized loss, worse than March 2020.” They also included a chart showing how much BTC had fallen relative to cost basis.
“The lowest-profitable wallet cohort holds 1-100 $BTC and has unrealized losses equaling 30% of the Market Cap.”
Annotated chart of Bitcoin net unrealized profits/loss (NUPL). Source: Glassnode/ Twitter
These numbers point to panic among even experienced investors, which is a surprising phenomenon considering Bitcoin’s volatility history.
The HODL Waves indicator groups coins based on how long ago they moved. It also records who bought and sold the dip.
Between June 13th and June 19, the percentage that the total BTC supply last moved between one day and one week ago rose from 1.65% up to almost 6%.
Bitcoin HODL Waves chart (screenshot). Source: Unchained Capital
The sentiment is at an all-time low
It was already “comparable” to a funeral in December 2021. But crypto market sentiment has outdone herself.
Similar: Top 5 cryptocurrencies you should be watching this week: BTC. SOL. LTC. LINK. BSV
The Crypto Fear & Greed Index is a monitoring tool that shows average investors are now more afraid than ever before in the history the industry.
The Index, which is based on a variety of factors to calculate overall sentiment fell to 6/100 on June 19, putting it in the “extreme fear” category.
The situation was only marginally better at the weekly close. However, the Index added three points to linger at levels which have historically been bear market lows.
Fear & Greed only had a lower score in August 2019.
Screenshot of Crypto Fear and Greed Index Source: Alternative.mecom. You should do your research before making any investment or trading decision.