Has a long winter set in for Bitcoin? Top analyst says it’s just bear market

MUMBAI: The price of Bitcoin has collapsed by almost 50 percent after reaching its lifetime high of $ 64,863. 1 in April, leading many to believe that the so-called “long winter” has come a little earlier for the cryptocurrency.

The collapse in prices was caused by the suppression in China of bitcoin miners, the lubricant that supports the operation of the machine, and transactions with cryptocurrencies that used the country’s financial system. In addition, the poster child of cryptocurrencies, Elon Musk, included Bitcoin, highlighting the problems associated with the environmental impact of its mining.

It is important to note that although China has banned bitcoin mining, it has not banned the storage or transaction of bitcoins. Its own central bank suggested earlier this year that cryptocurrency could emerge as a means for alternative investments.

Elon Musk’s Tesla also continues to hold its own bitcoin assets after slightly reducing its positions in the March quarter.

“We are in a bear market. This does not mean that Bitcoin will come to an end. Since important financial institutions have now made investments in bitcoin, my position is that Bitcoin will not fail” ” said George Kaloudis, a research analyst at CoinDesk, in an email interview.

In India, buying and selling cryptocurrencies has also become burdensome, as traditional banks stop supporting cryptocurrency exchanges. The RBI’s” concerns “regarding cryptocurrencies and its” behind closed doors ” push banks to avoid falling into one pool with cryptocurrency exchanges, indirectly affected the ability of Indians to buy or sell cryptocurrencies.

Although the hype around Bitcoin has certainly subsided compared to the beginning of this year, the cryptocurrency has still grown by more than 200 percent compared to the same period last year. Analysts say there are two important factors why the ongoing bitcoin sell-off has more to do with retail clearance than with a drop in interest in the terminal, as was seen after the 2017 rally.

A common sign of prolonged weakness in the bitcoin market is that the indicator of the ratio of the market value of the cryptocurrency to the realized value passes from the peak. Currently, this ratio is nowhere near its historical maximum. Bitcoin has seen deep-rooted bear markets in the past, according to a report by CoinDesk Research.

One more indicator that cryptanalysts track to assess the dynamics in the bitcoin market is the Puell coefficient, which is calculated by dividing the total value of bitcoins mined per day in US dollars by a 365-day moving average. This indicator is crucial for understanding the market cycles in bitcoin.

The Puell multiplier for bitcoin recently fell to the lowest level in one year, which, according to analysts, is a sign of a deep underestimation of the asset and weak sentiment in the bear market.

Although technical factors may indicate that the current bear market may soon dry up, sentiment among investors remains muted, given the crackdown on bitcoin miners in China. Kaloudis expects miners in China to quickly return to the network, which should boost sentiment in the asset class.

“These miners are rooted in the bitcoin ecosystem and have clear economic incentives to continue mining. Thus, although these miners may not continue to operate within the Chinese borders, they will move to another location, since bitcoin mining operations are very mobile, ” Kaloudis said.

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