Traipsing tightropes
Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
Despite a downpour of news, both bearish and bullish, BTC still finds itself chopping through the $40k - $44k range that has constrained price action in recent weeks. Since briefly wicking below stringent $40k support on 10 January, the largest crypto asset has challenged range highs without success – yet. While macro sentiment remains uncertain, a few promising catalysts have emerged that may spark a much-needed bullish reversal.
A network at peak strength
In arguably the most contentious narrative of the past year, 2021 saw major upheavals across the Bitcoin mining landscape. China’s “final” cryptocurrency ban forced the shutdown of BTC mining in the country early last year, which at the time accounted for the majority of global mining efforts.
While many viewed the crackdown as a massive blow to the network, the mass exodus of miners has since seen mining distribution become far more decentralised, with North America and Eastern Europe claiming the largest share of mining activity as of August.
Distribution of BTC mining by country as of August 2021 (CBECI)
Impressively, the rapid redistribution of mining activity has seen the BTC network’s hashrate reach all-time-highs (ATH) this week, despite energy-related unrest in Kazakhstan and murmurs of Russia enacting a blanket ban on crypto. Put simply, hashrate refers to the total computational power of mining on blockchain – with higher hashing signaling heightened security on the network. Put another way, a high hashrate indicates that there are many miners competing to solve blocks on the network, making it increasingly resilient against 51% attacks.
Talk about parabolic (blockchain.com)
Continued accumulation
There are many metrics one can analyse to determine global BTC holder activity. The Bitcoin Coinbase Premium Index considers the percentage difference between the price of Coinbase’s BTC/USD pair and Binance’s BTC/USDT trading pair. Higher premiums have historically indicated increased buying pressure from US investors. Having begun 2022 in the negative, Coinbase’s premium has flipped positive in recent weeks, observing a firm uptick since 4 January.
Furthermore, large wallets have continued to increase this year, with addresses holding >1000 BTC, up from 2,125 wallets in September last year to 2,153 at the time of writing.
Fresh from the metaverse
Meta announced further inroads to the non-fungible space on Thursday, with the company exploring the integration of NFTs to the company’s flagship platforms, Facebook and Instagram. The transition of the social media behemoths to Web 3 would allow for greater accessibility to non-fungibles across the globe, potentially even facilitating NFT trading on the platforms. Meta’s news comes after a similar announcement by Twitter late last year, with the online home of many crypto natives gearing up to support Web 3 wallet integration and verification of NFT profile pictures.
Looking forward
Recent crypto sentiment has been dominated by a climate of fear, as BTC teeters on the brink of $40k. On a high time- frame (HTF), BTC finds itself sitting firmly on support established in November 2020. Should this firm support give way, many would expect further downside into the $30k range. However, as we observed during May’s ~50% retracement, current ranging on long term support could simply represent another push from controlling interests to wrangle BTC from retail traders attempting to trade failed breakouts in both directions. Undoubtedly, as Buffett would say, there is currently ample “blood in the streets”. And so, the question remains: have the liquidations of past weeks allowed for sufficient accumulation to provide bulls with a chance to claim much-needed relief?
Crucial levels