2022 has been one of the most challenging years in the history of Bitcoin since its market launch back in 2009. While there have been several events in the past during which BTC took several blows, and its price plummeted quite a lot, what makes last year different from earlier cases is that the coin enjoyed two outstanding years in 2020 and 2021. Bitcoin reached new heights during these years, and investors felt more confident than ever in Bitcoin’s capacity to withstand anything coming its way.
However, 2022 shattered this belief and led many to be apprehensive and unsure of what they should do next. Some investors sold what remained of their portfolios as a means of bringing further capital loss to a halt. Others remained convinced that Bitcoin will recover sooner or later and that the crypto winter cannot endure forever. They weren’t exactly wrong since the change appeared in January 2023, with BTC raising a bit higher each day. The largest exchanges in the world saw traders rushing to buy Bitcoin again, with everything seemingly back to normal.
Nonetheless, the following months came with different challenges, as the value stagnated or even dropped in the wake of bank crashes, whale transactions and talks of regulations. Yet, predictions remain optimistic, and many analysts expect the digital coin to reach previously unseen levels.
Regaining Momentum
Traditional financial markets have become increasingly more critical for the overall health of crypto. The reason for that is quite simple to understand. It relates to the fact that cyber money and tokens are gradually becoming more accepted for mainstream transactions. Businesses and organizations are either investors themselves or allow customers to perform crypto payments. While this is a good thing overall, since the initial purpose of cryptocurrencies has always been for it to power daily transactions, there are some drawbacks as well. Mainly the fact that Bitcoin is now vulnerable to market shifts affecting stocks and bonds.
However, Bitcoin seems to hold fast and has recently surpassed the $28k mark, despite US interest rates sending prices on a downward spiral. However, will this movement last? Most believe that the answer is an emphatic yes, despite the fact that there may still be further bumps down the road. There are still concerns related to banks, as inflation rates show no sign of letting off. And while large institutional investors appear to be reluctant to resume transactions as they did in the past, it’s not difficult to imagine that this trend won’t hold for long. In fact, some believe that Bitcoin could even climb to $100,000 this year, reaching previously unseen heights.
Bull Rally
The bitcoin market has survived under a bearish tendency for months on end now. So, while some eagerly await a bull run, others are more cautious and wonder about its possible implications for fluctuations. There are even some traders who are certain that Bitcoin is currently undergoing bullish movements. Between the 16th and the 22nd of March, Bitcoin had a 17.5% rally, which was quite a shock for many.
There are several reasons for this, including the ongoing banking crisis that led to the collapse of Silvergate, Signature Bank and SVB and transactions carried out by investors looking to shield themselves against inflation. Climbing interest rates can possibly increase inflation even more, leading to detrimental effects for both businesses and households. In the US, figures released on the 21st of March reveal a decrease in mortgage rates due to the higher demand for government bonds. Sales increases similarly suggest that the housing market has finally reached a price floor, the lowest amount that can be paid for any type of goods or services.
As a result, with consumer prices rising, many investors believe that, instead of waiting for a hypothetical future in which prices return to their previous, lower levels, the best thing you can do as a trader is learning to navigate the new financial environment. Higher prices are one of the most typical signs of fiat currency debasement. As a result, banks needed emergency bailouts, and companies had no choice but to lay off thousands of workers due to the declining sales rate. As such, a portion of Bitcoin’s recent spike is a direct result of the dollar becoming weaker.
Based on the current price action, four likely scenarios could occur which involve the bull market:
- $25,000 to $26,000: The call instruments are favored by $50 million
- $26,000 to $27,000: Net results favor the buy instruments by $140 million
- $27,000 to $28,000: Here, the ratio between the calls and puts would be 12,700 to 800, meaning the bulls’ advantage would increase by $330 million.
- $28,000 to $29,000: In this scenario, the advantage would increase to $405 million.
Mining in Texas
Concerns about environmental issues as well as exchange and bank collapse haven’t been enough to deter miners from making Texas the newest mining hub in the United States. The power demands have climbed quite significantly, with around 2,100 megawatts of the state’s supplies being directed toward mining cryptocurrencies. As a result, power usage climbed by around 75% last year, figures that have nearly tripled compared to the prior 12 months.
However, this has arrived in the context of the industry facing new federal regulations regarding mining. Some have proposed a 30% electricity usage tax as a treasury and commodities regulatory framework. New York has also recently imposed a ban on mining that uses power generated from fossil fuels, and other states are soon expected to follow in their footsteps. These changes have come as a result of rising environmental concerns. Mining is incredibly energy-intensive, and, compared to other regions of the US, in Texas, some counties have even offered express tax incentives to those using solar or wind power. However, the fragility of the state’s grid was exposed during the winter, when roughly 250 people died during a storm blackout.
Therefore, the prospect of increasing mining demands has become concerning for those living in the state due to the pressure the system will have to withstand. Moreover, the future of cyber money remains uncertain, and while predictions are optimistic, only the future can tell how everything will unfold.
