Category: NEWS
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Bitcoin price outlook after BTC break above $23k
- Bitcoin’s rally from December lows after the FTX collapse surprised many investors, Glassnode says in its weekly report.
- Bitcoin could see further upside but a fresh buy signal is likely at prices around $28.3k.
- Selling pressure above $23.3k is more likely given short-term holders and miner push for exit liquidity.
Bitcoin price remains poised near $23,000 after a breakout pushed the leading cryptocurrency’s value above the psychological $20k level.
As highlighted ove the weekend, Bitcoin’s surge to prices above $23,000 did surprise many people, and while optimism is high among bulls, a potential liquidity exit from profit booking is likely. Particularly, this could be the outlook given how brutal the 2022 bear market was for short term holders and miners.
On-chain data platform Glassnode has highlighted this possibility.
The recent market rally has pushed #Bitcoin prices above $23k, surprising many investors.
However, with higher prices comes an increased motivation for network participants to take exit liquidity, especially after the prolonged bear of 2022
Read here 👇https://t.co/D5QY9n5dp7
— glassnode (@glassnode) January 23, 2023
Glassnode’s outlook after latest BTC price action
According to on-chain data firm Glassnode, Bitcoin looks “almost out of the woods,” but the price action to levels in the $21k to $23k region also reclaimed several on-chain pricing models.
A look at the Investor Price (currently at $17.4k) and Delta Price ($11.4k), signifies a similar price action at the bear market bottom of 2018-2019. Investor Price is the average price at which investors acquired all the spent and miner distributed coins, while Delta Price is derived from Realized Cap minus Bitcoin’s all-time Average Cap to get a technical pricing model.
At the base of this outlook is the price discovery phase, which during that 2018 bear market bottom lasted 78 days. The current market is at a similar level, with BTC above the Realized Price of $19.7k.
“This suggests an equivalency in durational pain across the darkest phase of both bear markets,” Glassnode wrote in its weekly market report.
Still on the Investor Price/Delta Price metrics, the on-chain platform points to a measure called compression, which takes into account the spot price to determine the intensity of the market’s undervaluation. The metric also correlates with the scale of change in an asset’s Realized Cap or capital inflow volume, with a threshold zone of 0.15-0.2.
Given the current BTC price and compression value, Glassnode estimates a bullish confirmation signal could be triggered if Bitcoin bulls reclaim $28.3k.
More optimism for bulls
Also helping the bull case is the Supply in Profit measure, which spiked 12% in the last two weeks to rise from 55% to 67%. The spike in percent of coins in profit is “the sharpest” of all prior bear markets, suggesting a lot more coins changed hands below the $23.3k level.
Key to bulls’ case is also the fact that Bitcoin price at current levels is above all the three cost basis of long-term holder, short-term holder and BTC Realized Price. This is the first time spot price has pierced the three Realized Prices and sustained momentum above the levels would be positive.
The recent surge in #Bitcoin price action has resulted in an initial breakout above all three cost-basis for the first time since the 2018/19 bear market and the March 2020 Covid crisis.
A sustained duration above these key psychological levels would be considered constructive. pic.twitter.com/kyzuwSPenv
— glassnode (@glassnode) January 24, 2023
A bull trap case
While Glassnode points to potential bull case scenarios, its report also highlights probable cases of fresh sell-off pressure.
According to the on-chain data report, one of these is the “substantial spike in profitability,” which the platform says raises the possibility of selling pressure triggered by short-term holders.
Miners are also likely to be motivated by the price action and might look to liquidate some of their holdings, adding to a potential retreat for BTC price.
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The market saw over 340,000 NFT buyers as crypto rallied
- NFT buyers last week rose to 348,426, about 41% up on the previuos week.
- NFT sales volume also rose, with more than $244 million in sales last week representing a 5.4% increase.
- Sales (USD) volume and buyers increased in tandem with Bitcoin price hitting levels above $23,000.
Non-fungible token (NFT) data from last week shows the market attracted 348,426 buyers, roughly 41% higher than the previous week.
According to NFT data platform CryptoSlam, the buyer count of nearly 350,000 corresponds to a 40.99% this past week.
As of Tuesday morning, 24 January, 2023, there had been over 419,000 unique buyers year-to-date. The uptick coincides with a rally across crypto, with volatility pushing Bitcoin price above $23,000 and Ethereum above $1,600 for the first time since early November 2022.
Indeed, as data from CoinGecko shows, Bitcoin’s price is currently up more than 7% this past week. Over the last two weeks, the flagship cryptocurrency’s value has soared 35%.
Among top blockchains with most buyers on the 7-day timeframe, Ethereum leads with 146,380 (36% increase) and Solana is second with over 89,800 NFT buyers at 73% increase this past week. Cardano is third while BNB Chain ranks 7th but with a 74% spike in buyer participation.
NFT sales jumped 5% last week
At the same time, the global NFT sales volume in the past seven days indicates a 5.4% increase, with more than $244 million worth of NFTs traded in that time.
The most sales volume was on Ethereum at almost $200 million, while Solana, Cardano, Immutable X and Polygon complete the top five as of 24 January.
Among the top 10, the WAX blockchain saw the most increase in NFT sales with 82%. Meanwhile, Solana and BNB Chain recorded the largest decline over the past week as NFT sales on these blockchains fell 20% and 33% respectively.
NFTs sales stood at $623,439,866 for the month, data from CryptoSlam showed ( as of 24 January 2023), with total NFT transactions year-to-date at nearly 4.2 million (it was 4.7 million for December 2022).
While there has been a slight decline in the metric compared to the previous week, the statistics suggest the NFTs market has seen trading volume and buyer participation swing alongside movements in the broader crypto market.
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Bankrupt BlockFi plans to sell $160M Bitcoin mining hardware loans
- BlockFi filed for Chapter 11 bankruptcy in November 2022 citing exposure to the just collapsed FTX.
- The plan to sell off the loans backed by Bitcoin mining machines is part of the bankruptcy proceedings.
- Bidders have until before the end of January to submit offers.
About two months after BlockFi filed for Chapter 11 bankruptcy, the crypto lender now plans to sell off $160 million in loans backed by Bitcoin mining hardware as part of the bankruptcy legal proceedings. In total, the loans are backed by about 68,000 Bitcoin mining machines
Although BlockFi cited FTX’s exposure as the main reason for its bankruptcy, the crypto lender had announced cutting its workforce by 20% in June 2022 citing the crypto prices meltdown. The layoff announcement came days after reports emerged that the lender was in talks to raise funding at a $5 billion valuation.
Bidders have until January 24 to send offers
According to reports from Bloomberg, BlockFi started the process of selling off the Bitcoin mining hardware-backed loans last year. It is believed some of the said loans have already defaulted since then and are candidates for under-collateralization following the drastic decline in the prices of Bitcoin mining hardware.
In an interview with one popular media outlet, crypto lawyer Harrison Dell who is a director at Australian law firm Cadena Legal said that the loans are not worth their paper value to BlockFi if the Bitcoin mining equipment used as collateral is worth less than the value of the loans.
According to Harrison Dell, the people bidding for the loans are most likely debt collection businesses saying that selling the debts is all that BlockFi can do at the moment.
It is believed that BlockFi’s attempt to sell off its loans is likely a part of the lender’s efforts to pay off its creditors who are about 100,000 in total.
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Bitcoin’s “hedge” narrative is dead, as speculative price action continues
Key Takeaways
- Crypto has risen to start the year off the back of expectations that interest rates may be cut sooner than anticipated
- This contrasts with the view that crypto is uncorrelated, proving it false
- Assessing the price action of crypto through the pandemic and subsequent rate-raising cycle shows an extremely risky asset class that moves in line with other speculative asset classes
Over the last couple of months, markets have turned green off the back of inflation data softening around the globe. Crypto hasn’t been left off the invite list, with digital assets surging to their strongest rally in 9 months.
If there was ever any doubt (and by now, there really shouldn’t be), this proves once and for all that any narrative around crypto being an uncorrelated asset is dead.
Pandemic bull run
To quickly recap on the last few years in cryptoland, the asset class initially moved violently upward as central banks worldwide pursued ultra-low interest rate policy.
As economies ground to a halt for the ultimate black swan, the COVID-19 pandemic, nations faced a highly uncertain outlook in Q1 of 2020. With lockdowns sweeping the world, central banks were forced to do what they could to stimulate these abruptly-shut societies.
Out came stimulus packages of an unprecedented scale.
With all this stimulus and generationally cheap money, risk assets went bananas. The biggest leader of all was cryptocurrency. Some argued that the assets were rising as a result of the inevitable inflation that would result from all this expansionary monetary policy, as crypto was a hedge against the fiat system. The argument wouldn’t hold.
The transition to a new interest rate paradigm
The year 2022 did indeed bring a spike in inflation, and this time central banks were forced to do the opposite – aggressively hike rates as the cost of living spiralled relentlessly.
This has reined in risk assets, as per the playbook. Liquidity is sucked out of the system, suppressing demand. Investors now have alternate vehicles in which to park their wealth and earn a yield, with government-guaranteed T-bills now offering reasonable alternatives, as opposed to the zero rates previously (or negative in some nations).
But cryptocurrency followed the rest of the world’s risk assets down. Not only that, but the scale of the meltdown in the sector was unlike anything we have seen in a major asset class in a long time. Bitcoin shaved over three-quarters of its market cap, and it came out favourably compared to altcoins, many of which were decimated.
And now, the last couple of months have brought more optimistic readings regarding inflation. The numbers are still scary, but just a little bit of positivity has crept in that the worst may have passed. Of course, there is still a war ongoing in Europe and now fear has elevated that a recession may be imminent (if not here already), but hey – let’s celebrate whatever wins we can.
The stock market has cautiously crept upwards, as the market moves to the expectation that high interest rates will cease sooner than previously expected.
The only thing is, crypto has also risen. Not only that, but it has printed gains which blow the moves in equity markets out of the water.
Which, you know, kind of suggests that this may not be an inflation hedge at all. As inflation comes back down and the likelihood of lower rates and another expansionary period grows, crypto rises. Go figure.
Correlation vs stock market remains high
The proof is in the pudding. It is pretty clear by simply looking at the price chart of S&P 500 vs Bitcoin that the correlation here is stark – with the key lurking variable being interest rates.
Quite literally, crypto is the opposite of an uncorrelated asset – it has moved in lockstep with the stock market for the last few years.
Interestingly, there have been periods of decoupling, however. Unfortunately, they have come amid crypto-specific crashes. To show this, I plotted the Bitcoin/S&P 500 correlation against the Bitcoin price over the last couple of years.
The correlation has been high, aside from a few noticeable periods – all occurring when the Bitcoin price plummeted. The most recent example was November 2022, when crypto wobbled amid the FTX crash.
There really is no debate here. Crypto is a highly correlated, extreme-risk asset. The only question is whether it can shed this moniker in the long term. But any thought contesting that it is not currently wildly speculative is wide of the mark.
