Only the lazy did not write today that Bitcoin collapsed on Wednesday under the onslaught of hawkish FOMC protocols and Internet disconnection in Kazakhstan. Nevertheless, it is worth noting what happened and how likely it is that the bears took over the crypto market.
Mass liquidation of positions
At the end of the trading session on Wednesday, Bitcoin broke through the sideways support level of 45,733.38–52,216.77 and lost about 7% in a day. Today, the decline continues, and the price at the time of this writing is holding at $42,000 per coin.
During this fall, $810 million worth of positions were liquidated in the cryptocurrency market, including $318 million worth of Bitcoin orders.
Protests in Kazakhstan hit Bitcoin miners and hashrate
Numerous crypto analysts point out that the sharp drop in the price of Bitcoin may be due to the political protest in Kazakhstan. After the United States, Kazakhstan is considered the second-largest country in terms of the volume of Bitcoin mining. It accounts for approximately 18% of the network hashrate.
Against the background of the internet outage in Kazakhstan, the hashing speed of the Bitcoin network fell by 12% in just a few hours. The hashrate fell from a high of 194 EH/s on January 4 to a low of 168 EH/s. It later recovered slightly to the level of 172.89 EH/s.
Renowned news outlet Wu Blockchain notes:
"Due to protests in Kazakhstan and nationwide network disconnection, the hashrate of Bitcoin mining pools such as AntPool, Poolin, F2pool, ViaBTC, etc. all plummeted on January 5. Kazakhstan accounts for about 18% of the global Bitcoin hashrate."
FOMC Protocols - Parallel Impact
The second factor may be the hawkish tone of the FOMC minutes released on Wednesday. It became clear from the document that the central bank is determined to tighten monetary policy and act quickly to contain inflation. In addition, a strong recovery in the labor market is taken into account, which removes obstacles to tightening monetary policy.
Against this background, the dollar rose in price and the demand for risky assets fell, which includes bitcoin with altcoins.
Bitcoin Outlook
Now that the reasons for the fall have become a little clearer, the key question remains: how serious is it? Is it a bear market or is it just a correction?
Crypto analysts have conflicting opinions. Some are shouting that "everything is lost, we are going for $10,000," others are still optimistic.
For example, the holders are still calm. Cantor analyst Mike Colonnese said in an interview with Bloomberg:
"While we recognize the price of Bitcoin is volatile and difficult to predict over the short-term, over the longer-term we are bullish on the price of the digital asset, which is an important revenue driver."
Now let's see what you can lean on. What remains is the technical analysis and the price that "includes everything." Until the price of Bitcoin stays below $40,000 per coin, there is no need to panic. At least there is still a chance for recovery.
On the other hand, the factor of influence of Kazakhstan remains a great uncertainty. Recall how the crypto ban in China brought down the market for three months. The recovery of these losses began after some of the miners moved to Kazakhstan and some to the United States.
How long the current situation in Kazakhstan will last, no one knows. If miners don't get back to work there quickly, the pressure on Bitcoin could persist. This means that there is a risk of BTCUSD consolidation below $40,000 per coin. And then the path down to the $30,000 mark will be open.
In the face of such uncertainty, traders are better off moving in short runs, focusing on technique and strong price levels. A clear upward rebound from support at 41,959.23 can be taken as a signal for a cautious buy. But will there be a rebound? We will continue to observe. And place stops on trades.
