Cryptocurrencies Face A Bear Market That Still Has Its Way

The bitcoin ‘roller coaster’ seems to have entered a kind of tunnel or channel that has a ceiling in the area of ​​$ 40,000 and a floor in the area of ​​$ 32,000. However, this relative tranquility could soon be truncated.

A good part of the experts believe that bitcoin and cryptocurrencies are immersed in a bear market that will hit the price of these assets again, being able to destroy the channel through which bitcoin is ‘navigating’ at the moment. There seems to be some consensus when it comes to establishing the $ 20,000-23,000 area as the support from which the token could take off again.

After a May for oblivion in which it fell as much as 35%, bitcoin headed June in search of good news. The adoption of the cryptocurrency as a currency of official use by El Salvador a few days ago just spurred a price that this past weekend seemed to find the catalyst it was looking for. Of course, this was Tesla CEO Elon Musk. After unleashing the bleeding of the token in May by denying it for its environmental impact, Musk partially rectified.

“When a reasonable use (at least 50%) of clean energy by miners with a positive future trend is confirmed, Tesla will again allow bitcoin transactions,” he tweeted this Sunday, giving way to increases that lasted to Monday.

After these words and the support of the well-known billionaire investor Paul Tudor Jones , bitcoin returned to the area of ​​$ 40,000 and not a few looked askance at the nearby resistance. However, just 48 hours later, the digital currency momentarily pierces $ 39,000 again.

Although these occasional impulses may attract the attention of bulls eager for good news, analysts at JP Morgan, Natixis or eToro ask for caution because their projections point to a bear market. In a recent note, the investment bank’s strategists, led by Nikolaos Panigirtzoglou, warned that bitcoin futures were telegraphing negative signals as the token’s spot price rose above futures prices.

Bitcoin navigates a well-defined channel
In the same report, JP Morgan economists warned that bitcoin’s dwindling share in total cryptocurrency market capitalization is another worrying trend. The cryptocurrency currently represents just over 40% of the cryptocurrency market compared to the 70% it represented at the beginning of the year.

Javier Molina, spokesperson and analyst for eToro adds that “we are still wondering what will be the next direction that bitcoin can take in the coming sessions. The range that we marked in previous weeks, 30,000-44,000 dollars, is still in force today.

This movement, it seems that the transfer of tokens from weak hands to strong ones follows the trend that began in May. However, this does not imply any upward movement and we must wait for the break of $ 44,000 to think about a return to the zone of maximums “. Meanwhile, the turbulence is served.

Market in crisis and China
For its part, the Natixis investment bank research team does not bring good news for crypto in the short term either, although they recognize that in the medium and long the situation could be quite different (as the blockchain improves and becomes more efficient in the energy use).

The note published by the French bank explains that “since mid-May, bitcoin and cryptocurrencies have been in crisis. After reaching a high of $ 63,500, bitcoin collapsed to fall to 30,000, while ethereum went from trading at from $ 4,400 to fall to $ 2,000. Finally, the capitalization of all crypto assets has fallen from 2 trillion in early January to 1.5 trillion in early June. “

“The decline in the price of crypto assets is due to their structural weaknesses such as negative environmental impact due to intensive energy use and the lack of a regulatory framework … power outages in parts of China, where a large amount is located. of mining facilities, have led to a drop in the network’s hash rate , which in turn reduces bitcoin mining. This has led the Chinese authorities to prohibit the country’s financial institutions from providing services related to bitcoin and other cryptocurrencies. “, they explain from Natixis.

These experts explain that in Sichuan province, miners have until September 2021 to cease operations. The Chinese authorities explain this decision by the need to make a more efficient use of electricity. “All this news is worrying considering that China represents 65% of the bitcoin hash rate in the world.

Miners will move their operations to other more favorable countries or jurisdictions, but the network hash rate will probably decrease during this great migration. and therefore, it will weigh on the bitcoin. “

One step back to take two forward
Natixis economists believe that these fundamental risks are reflected in technical or chart analysis. “Bitcoin is still in a downtrend, with a significant risk of breaking the $ 30,500 support, which would pave the way for a return to $ 23,000 .

These levels are sure to attract investors who are looking for entry points. In addition, cryptocurrencies will continue to develop, the goal is to achieve a blockchain that consumes less energy, is faster and offers more protection.

Natixis experts comment that in this sense, the migration (by 2022) from ethereum to ETH 2.0 , a blockchain that consumes less energy, is faster and cheaper in terms of transaction costs, will mark a great step forward that will also accelerate all decentralized finance (DeFi). projects, which are largely based on smart contracts . “In short, there is a risk that bitcoin will hit new lows before picking up again, once the market has absorbed all the bad news.”

To recover, crypto assets need positive news from institutions (as in the first quarter) that announce their willingness to adopt or at least participate in the crypto asset market, the experts of the French bank conclude.

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