Crashes, Layoffs, and “Corralitos”: Cryptocurrency Market Situation Reminiscent of 2018 Crisis

Audy Castañeda
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Crashes, Layoffs, and “Corralitos”: Cryptocurrency Market Situation Reminiscent of 2018 Crisis

In the universe of digital assets, the word ‘crypto-winter’ is the most repeated in recent months.

None of the main cryptocurrencies escapes the sharp falls that have been recorded in this market since the end of 2021. The consequences are clear: great losses for investors and for trading platforms. The situation is reminiscent of the 2018 crisis.

Since the outbreak of the pandemic and until the end of last year, cryptocurrencies benefited from the monetary policies adopted by the main central banks to fight the economic consequences of the coronavirus.

These policies resulted in low-cost and easily accessible liquidity for investors, who rushed to invest in cryptocurrencies and large technology companies. Formerly the greatest beneficiaries, they are now the great losers of the change in tone of the central banks, which raise interest rates and reduce their balance sheets to fight high inflation.

Falls

Alejando Zala, country manager of Bitpanda in Spain, underlines that “the current conditions of the cryptocurrency market can only be described as extreme since the ongoing corrections have caused the price of the main virtual currencies to fall to levels that had not been seen before in almost two years.”

In this general environment of crashes that affects the entire market, Bitcoin, the world’s best-known cryptocurrency, has lost $20,000. It has not traded below that level since December 2020.

Already closer to $15,000 than $20,000, Bitcoin has lost almost 74% of its value since November of last year, when it hit all-time highs. He did it by stroking the $69,000. Ether, another of the most renowned cryptocurrencies, has fallen below $1,000, a figure not seen since January 2021.

The difficulties that these assets were going through worsened in May when the crash of the stablecoin terraUSD and the cryptocurrency Luna took place. After these losses, Bitcoin remained stagnant for almost a month around $30,000, until registering further declines, which began in early June.

“There is no doubt that the digital asset ecosystem is now in a new ‘crypto winter,’ that is, a prolonged period of falling prices,” explains Benjamin Dean, director of digital assets at WisdomTree.

In his opinion, this market turnaround is reminiscent of the crisis experienced in 2018, when in June of that year the price of Bitcoin fell to $7,400. It had closed in 2017 at almost $20,000.

In this new crisis and until now, the total capitalization of the 40 main cryptocurrencies is already below a trillion dollars, compared to the 3 trillion that came to be worth last November, at its peak.

The index that measures the sentiment existing among investors in the crypto universe now marks levels of extreme fear. “The capitulation seems to have arrived, but the bottoming out process will take some time,” explained Zala.

Corralitos and Layoffs

The ravages of this sinking extend throughout the ecosystem. Last Monday, the cryptocurrency trading platform Celsius Network suspended all transactions between clients and vetoed the withdrawal of capital due to “extreme conditions” in the market.

Shortly after, Binance, the world’s most widely used platform for buying and selling cryptocurrencies, suspended all Bitcoin withdrawals due to a technical issue. Although the measure was temporary, it contributed to consolidating the distrust of investors.

The falls have also caused other platforms to begin to tighten their belts. The change in the economic cycle and the fear that a recession will lead to a prolonged ‘crypto winter’ has led Coinbase and Gemini to announce staff reductions.

In this context, different institutions and organizations, from the European Central Bank (ECB) to the International Monetary Fund (IMF), insist on their warnings about the risks involved in cryptocurrencies, both for investors and for the financial system as a whole.

“Regulation is important to recover the trust lost in this technology due to speculation,” Alicia Pertusa, head of strategy for client solutions at BBVA, pointed out a few years ago at an event organized by Women in Banking (WIB), the initiative dedicated to the promotion of the women’s the role in Spanish banking.

“In the second half of this year, the approval in Europe of the MiCA (Markets in Cryptoassets) regulation is expected, which raises the level of demand for transparency in the processes of issuance, distribution, and marketing of digital assets”, explained Pertusa.

By Audy Castaneda

Bitcoin Dollar: How Much Will Crypto Go Down and When Will Be the Time to Enter

Audy Castañeda
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Bitcoin Dollar: How Much Will Crypto Go Down and When Will Be the Time to Enter

There are those who explain, with arguments, why it can continue to fall to $10,000, and others who buy waiting for the jump.

Bitcoin’s weekend drop below the $18,000 barrier raised questions in the financial world about whether it still has a long way to go or if it’s time to jump in.

The scenario proposed by analysts, even though Bitcoin emerged above the psychological price floor of $20,000 on Sunday, is extremely disturbing.

According to data from CoinMarketCap, there are more than 19,000 types of cryptocurrencies, so it is very easy to get lost in this universe and be overwhelmed by the feeling that if you spend too much time looking for an opportunity, it will slip away.

Cryptocurrencies

According to Green Bond Meter (GBM) specialists, the analysis of cryptocurrencies differs from that known for traditional assets, because this class of digital assets does not have a publicly accessible balance sheet as if it were a publicly-traded company.

Hernán Aycaguer, the Financial Manager at GBM, recommends, first of all, avoiding the explicit purchase recommendations that others may make.

Acronym DYOR

“In the crypto world, the acronym DYOR (Do Your Own Research) is famous, that is, “do your own research”, remember and introduce: “It is key to look comprehensively at the project behind crypto, its age, who are its founders and how they have been financed”.

The specialist then suggests looking at Coin Market Cap or CoinGecko, two prestigious exchanges, for strategic indicators that allow price analysis.

Iñaki Apezteguia, professor and crypto communicator, adds that, unlike other bearish cycles in the crypto market, “this time we are facing a recession scenario fueled by a pandemic and war, which generates instability in the world.”

Downwards

In his opinion, Bitcoin has to continue its decline, finding a possible floor in the area of ​​$12,000: “Bitcoin’s dominance is decreasing (today at 44%) and something atypical has even been seen and that is that Bitcoin has dropped by last 15 days more than other altcoins: BTC 31%, BNB 25%, ADA 19%, DOT 13%.”

To recover, Apezteguia thinks at least 120 days to correlate with other bearish cycles, but it may take longer.

Natalia Motyl, Chief Economist at La Crypta, a Bitcoin awareness organization, explains that many speculators who jumped in for quick profits are turning to safer, higher-yielding assets.

Below US$10,000

“Likewise, what happened with Luna, Coinbase, and Celsius generates a lot of mistrust that encourages the exit of the most inexperienced. Bitcoin can easily fall below $10,000 and there will be a cleaning of various cryptos that are going to tend to disappear,” she predicts.

But that, in part, is favorable because it will demonstrate the strength of Bitcoin and Ethereum: “As they are programmed, they are the future and as more people understand that it is a revolution that takes power away from governments, the higher its price will be in the future,” Motyl further explained.

High Volatility

Elsa Mercedes Ortiz, owner of Mechi Learning, warns that, although Bitcoin is used for its benefits, such as deflation, immediacy, and globalization, we must be vigilant against one of its main risks: high volatility.

“Even so, citizens in countries such as Argentina and Venezuela adopt it as a means of protection against hyperinflation. Mainly, adolescents do not think in dollars, but in Bitcoin; therefore, they are more prone to take advantage of this price offer to buy, while others sell positions, because it can fall up to US$10,000,” Ortiz concludes.

By Audy Castaneda

Top Five Cryptocurrencies to Watch this Week: BTC, SOL, LTC, LINK, BSV

Audy Castañeda
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Top Five Cryptocurrencies to Watch this Week: BTC, SOL, LTC, LINK, BSV

Bitcoin price is showing some early signs of a relief rally, and SOL, LTC, LINK, and BSV could be next if the bulls retake $20,000 as support for BTC.

As already reported, the price of Bitcoin (BTC) fell to $17,622 on June 18. It is the first time in the history of Bitcoin that it has fallen below its previous cycle high. The aggressive monetary tightening of the US Federal Reserve, the crisis of the cryptocurrency lending platform Celsius and the liquidity problems of the investment fund Three Arrows Capital are creating a sense of panic among traders.

Could the bulls stop the short-term Bitcoin price decline? In this article, we will study the charts of the top 5 cryptocurrencies that could outperform all other coins.

BTC/USDT

The Bitcoin price crashed below the crucial support of $20,111 on June 18, signaling the resumption of the downtrend. A small silver lining is that the bulls bought during the dip.

Buyers are trying to push the price back above the breakout level of $20,111. If they manage to do so, it will suggest that the drop to $17,622 on June 18 may have been a bear trap. The BTC/USDT pair could then rally to $23,362, where the bears could once again mount major resistance.

SOL/USDT

Solana (SOL) has been in a strong downtrend, but the positive divergence on the RSI suggests that the bearish momentum might be weakening.

The bulls will try to push the price above the 20-day EMA ($36). If they do, it will suggest that the bulls are back. Thereafter, the SOL/USDT pair could rally to the 50-day SMA ($50), where the bears could once again mount a major defense.

Conversely, if the price turns below the 20-day EMA, it will suggest that the bears do not want to give up their advantage. Then the sellers will again try to push the price below $25 and start the next leg of the downtrend.

LTC/USDT

The bears attempted to drop Litecoin (LTC) below the important $40 support on June 18, but the bulls are defending the level aggressively.

The relief rally has reached the 20-day EMA ($55) which is an important level to watch as a breakout and close above it could suggest a potential trend reversal. The LTC/USDT pair could rally to the 50-day EMA ($68) thereafter.

Contrary to this assumption, if the price turns down from the 20-day EMA, it will suggest that the trend remains negative and traders are selling on rallies. Then the bears will make another attempt to drop the pair below $40 and resume the downtrend.

LINK/USDT

Chainlink (LINK) is in a downtrend but trying to establish a bottom near $5,50. The bears pushed the price below this level on June 13, June 14, and June 18, but they were unable to sustain the lower levels. This suggests that the bulls are buying the dips.

The positive divergence on the RSI suggests that the bearish momentum may be weakening. The buyers will try to push the price towards the downtrend line, which is likely to act as a major resistance.

If the price breaks out of the downtrend line, the bears will again attempt to drop and sustain the LINK/USDT pair below the $5,50 support. If this happens, it will suggest a resumption of the downtrend.

BSV/USD

Bitcoin SV (BSV) has formed a widening pattern and the buyers are trying to push the price above the resistance of the setup. The RSI is showing a positive divergence, indicating that the bearish momentum is weakening.

The BSV/USD pair could rally to the resistance line, where the bears could try to stop the rally. If this happens, it will suggest that the bears are still selling on the rallies. This could keep the pair stuck inside the widening formation for a while longer.

Conversely, if the bulls break out of the resistance line, the pair could make a bottom. Then the pair could start a new move higher that could take it to $80 and then to $87.

By Audy Castaneda

US Congresspeople Are in Favor of PoW Bitcoin Mining

Alexander Salazar
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US Congresspeople Are in Favor of PoW Bitcoin Mining

The congresspeople believe banning proof of work will stifle innovation and erode economic gains. They acknowledged that a significant part of BTC mining uses renewable energy sources.

Fourteen US senators and representatives, led by pro-Bitcoin senator Cynthia Lummis, recently delivered a document to the Environmental Protection Agency. They favor cryptocurrency mining based on proof of work (PoW) like that of Bitcoin (BTC).

The congresspeople consider it inconvenient to favor one technology over another, including proof of work versus proof of stake. They said this could stifle innovation, erode future economic gains, and limit associated efficiencies.

Although they claimed that Bitcoin mining impacts the environment, they acknowledged that a substantial part of the activity uses renewable energy sources.

The officials accept the alleged potential environmental issues concerning the mining of crypto assets. However, they believe that responsible innovation will play a critical role in the economic future of the United States in the long term.

In that regard, the congresspeople mentioned that the company JAI Energy in Wyoming uses surplus oil and gas for mining Bitcoin. In the territory, other companies like Highwire Energy Partners use fossil fuel for the same purpose profitably and effectively.

They noted that Bitcoin mining using gas has reduced methane emissions in states like Texas, New Mexico, Colorado, West Virginia, Ohio, and North Dakota.

Crypto Assets like Bitcoin Are Essential to the US Economy

The congresspeople defend Bitcoin as they believe crypto assets and mining activities are essential to the US economy.

They recognize that other countries are adopting cryptocurrencies and believe that the United States should not remain behind. They said those assets attract large amounts of capital and talent to develop their own financial services.

The signatories to the document consider that people will widely adopt sectors like cryptocurrencies and blockchains in the next decade.

The document explains that the US government should reaffirm its commitment to responsible innovation amid rapid technological change. That way, it would ensure that future Americans continue enjoying prosperity and opportunity.

They also state that their request is in line with the executive order issued by US president Joe Biden last March.

The Congresspeople Fear that What Happened in New York Will Spread

The document does not mention it, but the call made by the congresspeople seems related to what recently happened in New York.

Last March, lawmakers in that state introduced a bill to suspend proof-of-work cryptocurrency mining operations for three years.

The project recently received approval, and now they are waiting for Governor Kathy Hochul to pass or veto it. New York would become the first state to ban Bitcoin mining in the United States if the former occurred. That is something that the congresspeople signing the document apparently want to keep from happening.

Bitcoin is trading at around USD 20,127 and has accumulated a 6.2% gain over the last 24 hours. While its daily trading volume is above USD 31.89 billion, its market capitalization is about USD 383.87 billion, according to CoinGecko.

By Alexander Salazar

Analysts Make Predictions about the Bitcoin Price after It Drops below USD 20,000

Alexander Salazar
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Analysts Make Predictions about the Bitcoin Price after It Drops below USD 20,000

A graph shared by trader Peter Brandt shows that the value of Bitcoin is around USD 18,000. Some renowned analysts believe there will be a rebound at the current price levels.

The price of Bitcoin (BTC) recently fell below USD 20,000, which many had feared would happen. Most analysts explore the possibility of even further drops, although the decline has been around 40% so far in June.

Among the most prominent predictions has been one by Peter Brandt, a trader with over 40 years of experience. He said that the price zone where Bitcoin remains would be crucial to testing whether the cryptocurrency has real value.

A graph Brandt shared on his Twitter account shows that this area ranges between USD 19,000 and around USD 12,000.

Jim Cramer, host of the Mad Money program on the American news channel CNBC, also made a bearish prediction recently. During a Squawk Box segment, the former hedge fund manager said that the value of Bitcoin would drop to USD 12,000.

Cramer thinks that personalities like Michael Saylor and Mike Novogratz feel forced to make optimistic predictions. As a harsh critic of Bitcoin and its promoters, he argued that they could not let its price drop any further.

Despite not being a renowned Bitcoin critic, Bob Loukas also foresees lower prices than the current ones. Before the recent drop, the trader and analyst said he would buy Bitcoin at USD 19,000. He also aimed to make another purchase at USD 14,500 if it reached that level.

There Are Also Promising Predictions about Bitcoin

Not all analysts are pessimistic regarding their predictions about the price of the pioneering cryptocurrency. For example, Tony Gallippi, co-founder of payment processor BitPay, believes it is about to bottom out. The CEO of the payment provider said this could happen in the coming two weeks.

The trader CryptoTony also has a positive stance toward the future value of Bitcoin. The analyst does not only believe the price will recover but also dismisses the impact of the drop from USD 20,000.

CryptoTony considers that this mark was a psychological level rather than not a support zone in itself. He added that the support testing the price at current price levels would be around USD 17,500.

The drop from USD 20,000 marks a negative milestone in the history of the leading cryptocurrency in the market. It is the first time it has fallen below the all-time high of a previous bullish cycle. In this case, it has dropped below the top of the 2017 cycle, when BTC first approached USD 20,000.

The top of a cycle had historically become relevant support for the previous one. Therefore, no one expected to see the price reach those levels again.

Bitcoin is trading at around USD 17,980 and has accumulated a 12.9% loss over the last 24 hours. While its daily trading volume is above USD 33.69 billion, its market capitalization is about USD 341.70 billion, according to CoinGecko.

By Alexander Salazar

Cryptocurrencies: The Real Reasons for the Fall of Bitcoin and What Is the Best Way out

Audy Castañeda
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Cryptocurrencies: The Real Reasons for the Fall of Bitcoin and What Is the Best Way out

One way to minimize the risk, for those who are not sure about entering at the moment, is to invest in mining.

Everyone talks about the cryptocrash and the fall of Bitcoin, but people are seeing the wrong movie. It is not about how much it has fallen, but how much it has resisted. That is because Bitcoin is effectively facing a storm that in other circumstances could have shipwrecked it, and it is going through it with admirable skill.

Storm Components

First, the war with Ukraine, which generated political instability.

Second, the Fed rate hike, which for the first time in 20 years suffers an increase, and in a world with political instability and rate hikes, the big funds logically change risky investments for safe ones.

Third, many Bitcoin holders were heavily leveraged, unable to withstand a downturn. The expectations of a continuous rise generated by the Bull Run during 2021 caused a large number of investors to borrow money to buy Bitcoins. But this type of loan generates volatility because as soon as the price drops to a certain level, investors have to sell their Bitcoins to pay off the loan. That is, they do not sell them out of mistrust of the currency, but because they are financially forced to do so.

In this context of political instability, rising rates, and strong leverage, two specific events occurred that increased fears in the crypto world. The first was the collapse of LUNA, one of the top 10 cryptocurrencies, which for various reasons collapsed in less than 24 hours, causing panic among investors, and dragging down the rest of the cryptocurrencies, including Bitcoin, which had nothing to do with it.

The second event is related to some exchanges that, due to not having grown solidly, could not withstand the Bull Run and had to prevent their users from extracting funds. Such was the case with Celsius, which sent a statement saying that for the sake of its users it did not allow them to withdraw their money.

Consequently, Bitcoin lost its bottom of $30,000 and fell to $20,000. But the news is not how much Bitcoin fell, but why the heck it fell so little. And that’s what’s surprising because no bank can withstand a run, not even the most solvent. But Bitcoin is succeeding. Because in this run, where many investors, large funds, and small savers are selling their Bitcoins, in return there is another group of investors, large and small, who are doing the opposite and taking advantage of this fall to buy Bitcoins.

Crypto Mining, Instrument to Mitigate Risk

One way to minimize risk, for those who are not sure about entering at the moment, is to invest in mining. Because the prices of mining machines have dropped considerably, and it is a way of participating in the digital economy by reducing risk. I illustrate this concept with an example: If Pedro wants to invest in Bitcoins, to earn money he has to buy Bitcoins and wait for the price to rise. On the other hand, if you buy a mining machine, you do not need the price to go up to start making money, because if the price of Bitcoin remains stable when you buy the machine, the machine generates income, regardless of whether Bitcoin goes up.

Also, in case the price of Bitcoin goes down, if someone bought Bitcoins, their investment will turn negative. On the other hand, if they purchased a mining machine, even if the price of Bitcoin drops a little, the machine continues to generate income, as long as the cost of energy is less than the profits that said machine generates.

By Audy Castaneda

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