A Big Week for Cryptocurrency is Coming as Macro Catalysts Develop

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  • Bitcoin reached $17,200 after an overnight squeeze brought the price of BTC to levels that were approaching one-month highs.
  • In the past week, the total market capitalization of all cryptocurrencies has gone down by 1.5% to $840 billion.
  • Trust Wallet (TWT) went up 18.6% after the launch of the browser extension wallet in mid-November, which helped the service provider gain market share.
  • 1INCH fell 15.2% after 15% of the supply became available on December 1. This was part of the original four-year schedule.
  • This week, everyone is talking about the Consumer Price Index (CPI), and the Federal Open Market Committee (FOMC) will decide whether or not to raise interest rates.

Due to the Federal Reserve applying the brakes by raising interest rates for the sixth time in a row this year, the upcoming 12 months may be volatile. The Fed appears obligated to stick with this course of action until either inflation clearly slows down or something breaks.

There haven’t been any indications of sentiment deteriorating, according to derivatives metrics, despite the weekly price decline in a small number of altcoins and the 2% decline in total market capitalization. The put-to-call volume ratio currently hovers around 0.40 as the options market is more heavily populated by neutral-to-bearish strategies, of which 60% favor call (buy) options. The BTC options risk assessment metric is still favorable, and there is a balanced demand for leverage using futures contracts.

Source: Tradingview

More analysis of the BTC price action showed that more short positions were being closed.

Data from Coinglass shows that short liquidations on BTC totaled $7 million in a single hour on December 8. This shows how much people thought the price would go down further. Altcoin’s short liquidations brought the total to $111 million.

Since the crash in early November, there haven’t been a lot of liquidations, but short liquidations have helped fuel the recent move.

Source: Coinglass

The hash rate for bitcoin is still very high. As a result, the miners’ profit margins are severely squeezed as their costs to produce Bitcoin rise while their income from production falls. The profitability of miners is still at an all-time low, and many appear to be anticipating the next move by the central bank. Given the margin pressure that miners have all experienced, it is not surprising to see many of the companies giving up now. Some machines are losing money. Some people are actively reducing their Bitcoin holdings.

Source: bitinfocharts

It just makes more sense for investors to directly buy the Bitcoin and hold it themselves if miners depend on constantly rising Bitcoin prices to remain profitable as a business. If shareholder dilution isn’t too severe, miners who actually hold a significant amount of Bitcoin on their balance sheet will likely perform better than miners who don’t.

Concluding Thoughts:

Gold reached its peak with a 45% drawdown in 2022. Gold was unable to hold this high, and it took almost ten years for gold to reclaim it. Gold’s current price is about 8% lower than its 2011 peak. Arguably the worst store of value is the US dollar. It has lost 97% of its purchasing power since 1913. On the other hand, since it began trading in 2010, Bitcoin has increased by over 28 million percent and has quickly bounced back from its bear cycles.

The number of people who use cryptocurrency for things other than just playing around with it is growing. Bitcoin is getting used by more and more institutional investors, economies, and businesses. Even though this is the 4th bear cycle in Bitcoin’s history, the last 3 bear cycles show that this is a rare chance to buy. There is a lot of evidence to show that the current price level or any price level below $15,000 is either a major low or very close to a major low. The technical analysis and on-chain analysis both back this up. As Bitcoin becomes more and more a part of the world economy, we expect both the volatility and the huge returns to slow down. For now, we’re happy to buy Bitcoin at these low prices with an eye toward the long term.

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