Bottom is in
In this article, we are going to analyze and explain our thoughts on the crypto market in general and why we think the bottom of Bitcoin has already been reached. We will look at the key events of this bear market and their impact. We will look at the situation, using different types of analysis: macroeconomical, technical, fundamental and market sentiment analysis. Finally, we will try to make it as interesting as possible. Have fun.
The worst has been played out already
FTX collapse and Indexes bottom
In early November, the biggest and the worst Black Swan in the cryptocurrency market has happened — the crash of the FTX cryptocurrency exchange. The biggest and the worst, if not in terms of volume, but in terms of its significance and consequences. The damage to the industry was far more serious than after the death of Terra Luna. All because FTX had served as the main cryptocurrency gateway for institutional investors, and Bankman-Fried was the most hand-picked person in the crypto industry for White House folks. All of this was accompanied by the harshest rhetoric from the FED regarding rate hikes, inflation, and economic projections for the years ahead. Stock markets had bottomed out a month earlier, signaling the peak of the negative sentiment in the markets. All of this led to the Bitcoin bottom renewal.
Major VC bank fall and USDC depeg
When Fed Chairman Jerome Powell promised several more rate hikes on March 8, Silicon Valley Bank announced stock selling worth $2.25 billion to its investors. This combination triggered an epic bank run that wiped out SVB in two days. Around the same time, another bank, Silvergate, announced the freezing of all of its cryptocurrency activity, and Circle, the issuer of UCDC, suspended the conversion of stablecoin into dollars over the weekend, which led to the UCDC depeg. All of this combined led to Bitcoin plummeting from $23,000 to $19,500, and an equally sharp and quick bouncing back after the UCDC peg was restored and CZ announced $1 bln injection into the market. During those events annual liquidation records were then broken, and on that fuel Bitcoin went on a rally all the way to $31,000.
SEC naming plenty of altcoins securities
In early June, the Securities and Exchange Commission has filed 13 charges against Binance and Founder Changpeng Zhao for operating unregistered exchanges; misrepresenting trading controls; and the unregistered offer and sale of securities. Also, the SEC has charged Coinbase for basically the same. On top of everything else, the Сommission has named dozens of cryptocurrencies securities, including BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO. After that, plenty of platforms, such as Robinhood, announced the delisting sale of named securities. This resulted in a significant decline in asset prices: SOL -24%; ADA -24%; MATIC -24%; FIL -24%; ATOM -16%; SAND -21%.
Future is bright?
Macro
Not long ago, the consumer price inflation in the United States declined to 4.0% in May 2023, the lowest since March 2021 and slightly below market expectations of 4.1%. While the core rate, which excludes volatile items such as food and energy, has slowed to 5.3%, the lowest since November 2021. The data is showing a steady decline in inflation over the past six months, but it takes a while. The formula today is simple: the sooner we see target 2.0% dollar inflation, the sooner the era of cheap money will return, and investors will put money into risk assets.
On June 14, the FED has paused the current cycle of monetary tightening, which means that the pivot is not far off, and the macro sentiment is changing.
What is really going on during the FUD:
FED is going to pivot eventually. They’ve paused rate hikes in June, while remaining harsh in rhetoric. The window for another rate hike is still open, but anyway we are at the peak, because US inflation is going down and sooner or later FED has to start lowering the rate.
Hong Kong is becoming a world crypto hub. Eventually, this will lead to a gradual decrease in the influence of U.S. markets on cryptocurrencies, as well as to a tremendous increase in the amount of potential crypto investors.
BlackRock is going into crypto. Black Rock, the world’s largest investment fund ($10 trillion under management), recently announced its Bitcoin ETF plans. This means that Black Rock will buy real Bitcoin and offer a spot Bitcoin derivatives to its clients. It is still a long way to be approved, but it is basically a green flag for institutional many, that space is no more toxic to invest.
Stablecoins on Lightning. Throughout its existence, Bitcoin has been used primarily as digital gold, but only became more popular as a payment system after the launch of Lightning Network. While stablecoins, primarily USDT, have become the main growth driver for the entire cryptocurrency market, bringing new use cases, liquidity and millions of new users. The next big thing will be the combination of those two — stablecoins on Lightning Network. Lightning Labs is developing the Taro protocol, which is a new protocol on top of Bitcoin base layer for issuing, sending and receiving assets across the Bitcoin base layer, as well as the Lightning Network.
Technicals
There is a one true major resistance level on BTC price chart — 30–32k zone. If the breakout is confirmed, nothing actually would stop BTC from going towards 40k and higher. The price has been out of the global downtrend channel for a long time, and fixing above 25k was the best confirmation for that. After, the price has tested 30–32k zone, but failed to break and then went back to the 25k area. Now BTC is retesting 30–32k zone again, and if we get a “higher high”, then drop to ‘higher low”, Bitcoin could actually break its main resistance from here. It could happen, if the positive sentiment around BlackRock ETF remains. If Bitcoin breaks the resistance, that would be officially the end of the bear market.
Overall
The SEC is blatantly trying to strangle the industry, without providing institutional investors with clear rules. No clear rules equal no money. Among other things, the AI industry is sucking up all the extra focus and liquidity from the markets. There will be serious price declines: the recession in the US is just beginning, regulations are just forging, and the FUD on Binance is not over. In addition, stock indexes are at 10% from their historical highs while Bitcoin being so weak, and when they go down, cryptocurrencies will be in trouble, because everything is interconnected. Nevertheless, high likely that the global bottom for Bitcoin was in November at $15.5k, and there will be no more. There just isn’t much negativity left to reshape this global bottom, and the weakest are already wiped out from the space. The industry is waiting for clear regulations and macroeconomic sentiment improvements to institutional money come in.
Right now in DeFi those tools and protocols are being rolled out, that will partially or completely replace traditional financial instruments, not by themselves, but adopted by banks and governments. Bitcoin will remain the main tool and idol of the transforming financial world, as a high quality asset and a platform for exchange. Volatility will decrease when Bitcoin equals gold in terms of capitalization. There is every reason to believe that by the end of 2024 Bitcoin will reach at least $95k, as it forecasted in Microstrategy’s reports.
