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  • Half a billion dollars of short sellers liquidated in biggest crypto rally in 9 months

    Half a billion dollars of short sellers liquidated in biggest crypto rally in 9 months

    Key Takeaways

    • The cryptocurrency market cap is back above $1 trillion following the biggest surge in 9 months 
    • Half a billion dollars of short sales were liquidated over the weekend, the most in three months
    • Bitcoin is back above $21,000, Ethereum above $1,500, while altcoins have soared
    • Despite powerful bounce, the market is still down close to 65%, having peaked at nearly $3 trillion in November 2021
    • Bear market drawdown at 77% for Bitcoin, but traders are wary this may only be a short-term relief rally

    For a few hours over the weekend, if you looked at a crypto chart, it felt like it was 2020 again.

    COVID may be fading into the rear-view mirror, but so had crypto prices. I produced a deep dive into some on-chain data last week which showed how torrid 2022 had been for investors, with 73% less bitcoin millionaires, a drawdown of $2 trillion in the overall crypto market, and a reputation dragged through the mud by various scandals. 

    Looking at data this week for coinjournal.net, it is a little more optimistic for crypto investors. 

    Half a billion dollars of short sellers liquidated

    The weekend brought a little respite, however. Bitcoin surged to its strongest rally in 9 months, taking the market by surprise and breaking upwards above $21,000. 

    Looking at data from Coinglass, there were over half a billion dollars of short sellers liquidated this past weekend. The below chart shows the extent of these liquidations, more or less matching the long liquidations back when FTX collapsed in early November. 

    Crypto market regains $1 trillion mark

    The bounce in digital assets followed softer-than-expected inflation data. This optimism that inflation may have peaked has caused investors to bet that the Federal Reserve may pivot off its high-interest rate policy sooner than previously expected. 

    As we know by now, high-interest rates have sucked the liquidity from the market, hurting risk assets across the board. Crypto is very much trading like one of these high-risk assets, and hence prices have collapsed as the Federal Reserve has implemented this tight monetary policy – and hence crypto exchanges have been less than kind to long traders. 

    2023 has brought hope that if inflation truly has peaked, a light at the end of the tunnel may be visible. The crypto market has surged to regain a $1 trillion dollar market cap as a result. It is still a far cry from the near-$3 trillion all-time high, but Bitcoin at $21,000 and Ether at $1,500 marks the highest prices for the duo since before the FTX scandal. 

    Has the crypto market bottomed?

    The glaring question facing investors now is whether this is merely a short-term relief rally, or whether the bottom is in. 

    As with most questions in the market, macro holds the key. 

    “The last couple of months have undoubtedly brought indicators of a more positive environment with regards to inflation, as well as the boost of the Chinese economy reopening,”  said Max Coupland, Director at CoinJournal. 

    “However, I do worry whether investors are jumping the gun by presuming that this means the Fed will now pivot sooner than expected. (Fed chair) Jerome Powell has been adamant that rates will not taper until inflation is firmly under control, and we are still a long way from the 2% target, while uncertainties such as the Russian war in Ukraine still loom as highly unpredictable”. 

    Let’s play the (very) hypothetical game of assuming the bottom is in. That would put the bear market at 13 months long, with a 77% drawdown from peak-to-trough for Bitcoin. 

    Historically, this would place it as the third biggest drawback in history. However, that would only be in percentage terms. The crypto market today is vastly different to years past, and the size of the capital wipeout is on a different level – or over $2 trillion, to be precise. 

    So, while the length and size of the bear market could perhaps imply we are in the latter stages, past data simply cannot be reliably extrapolated when it comes to crypto. Bitcoin only broke through as a mainstream asset in the last few years, and prior time periods featured low liquidity and a niche set of investors. 

    Today, we are also facing an unprecedented macro climate – rampant inflation, high interest rates for the first time in Bitcoin’s history, and a bear market in the wider economy for the first time since the 2008 crash – the same year Bitcoin was invented. 

    In wrapping up, the past weekend has been a welcome reprieve for crypto investors, and amounts to the most powerful surge in nine months, back before the collapses of LUNA, Celsius, FTX and the transition to high interest rates in the board economy. 

    But the road ahead remains tough for the market at large, with inflation still lofty, a war ongoing in Europe and myriad other macro variables oscillating. This week has been good news, but crypto investors won’t be counting their chickens quite yet. 

    The next mark on the calendar? The all-important FOMC meeting on February 1st, when the Federal Reserve will decide upon the latest interest policy. 

    If you use our data, then we would appreciate a link back to https://coinjournal.net. Crediting our work with a link helps us to keep providing you with data analysis research. 

    Research Methodology

    Liquidation data via Coinglass. Price data from Yahoo Finance. All other data via CoinJournal

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  • Bitcoin and AI: Artificial Intelligence in Crypto

    Bitcoin and AI: Artificial Intelligence in Crypto

    • The global AI market is forecast to grow $1394.30 billion in 2023.
    • Investors and traders can tap into AI to benefit from features such as automation and accuracy.
    • Bitcoin and AI also have the capacity to combat frauds in transactions across global markets.

    Have you ever thought that where technology will extend us, either intelligent machines will replace us together or they will combine with humans to develop a third merger that will be four times more explosive than intelligent machines and humans? This is a long debate, but one thing is sure: artificial intelligence has plotted a strong position in this landscape, and almost every aspect is making full use of this. 

    This article is a mixture of Bitcoin with AI. Artificial Intelligence will be a role model for crypto enthusiasts to understand the crypto league and their sit in this landscape. 

    Salient stories

    A well-known market research firm Fortune Business Insight has predicted that the global AI market will extend to $1394.30 billion in the year 2023. Furthermore, Ai will drive better outcomes for crypto investors as it will predict the market value of coins perfectly. The pattern detection ability of AI will greatly influence the functionality of crypto. 

    Bitcoin and AI will combat many frauds that occur in transactions, and these transactions will be provided lethal speed. 

    In the crypto field, fraudulent activities have been the greatest threat, and if someone becomes a victim of these fraudulent activities, that will be a disaster. AI power will ensure a greater monitoring system around the digital currencies landscape, further fuming these currencies’ personalities. 

    AI provides better products that give the crypto the upper hand, and one such product is Trading Bots uses a range of AI tools like Machine Learning, Deep Learning, and others to enhance the crypto trading experience. Furthermore, these tools do not only work best for predicting the prices of crypto but for many other things like providing information about the crypto landscape, what’s new inside the crypto world, and many others. 

    Apart from these stories, there is a lot to debate. First among them is what people say about these coins. Different perceptions fall into the debate. First, a suitable amount of the population believes that these currencies can replace traditional paper currency in what sense, and secondly, many countries do not have to provide legal status, these countries and why major Tech companies of the world have yet to recognize the use of these coins. 

    The nature of these coins suggests that these coins are highly volatile, and predicting the exact future position of these coins is impossible. Even powerful AI tools cannot predict the real scenario. AI will just put efficiency but not to 100%. 

    When technology emerges, it also gives new opportunities for attackers to invade the system. Crypto trading is honey for the attackers, where they can exploit sweet. AI plays a beautiful role in this regard, but these attackers will adopt new ways to invade the system. 

    Positive signs 

    AI is a new and innovative thing for finance, especially crypto trading, and can lead to many amazes for crypto. And will help traders to extract the goods. But the story has not one hero but many others too. 

    The technological Landscape will grow in the coming time, which will help digital currencies to gather what they have lost. The year 2022 was a disaster for these coins, but technology will lead them to a stronger position in the coming time. 

    Despite poor performance in the year 2022, the demand for crypto is enhancing, which will further add to the significance of crypto. 

    When major companies recognize these currencies, the real game will start, and many companies have shown greater interest in this regard. 

    Final Thoughts

    There is a lot of heat going on regarding Bitcoin and AI, and the reason for such heat is simply the innovation they bring into this landscape. The digital landscape is all about techno products and their services, and both these dilemmas are best in the business. 

    On the one hand, Artificial Intelligence has been placing its theme in every aspect of the business. On the other hand, crypto, like Bitcoin, leads to innovative ways of investing. 

    And when both these things have merged, results are not hidden from anyone. One can use the internet to know better, and if not, then simply adopt both things, and then you will get to know about the difference. 

    Bitcoin and AI are providing many facilities to crypto companies and investors. The fascinating thing about AI is to predict the outcomes, which readily helps investors and companies to plot the future position of these digital coins. 

    Furthermore, this AI will lead to more secure transactions for investors and add greater measures for monitoring illegal activities within the crypto landscape. 

    There are AI bots for efficient trading that work as great news providers to traders, and together they perform the function of alerting the traders. 

    Last but not least, people’s perspective heavily influences the growth of these coins; when major companies or financial experts declare anything negative about them, then they will not merge in such a form to replace the traditional paper currencies. Still, if they feel positivity while using these coins, it will be easier for crypto like Bitcoin to make things happen. 

    If you are looking for the best crypto trading platform, then there is no need to search further. Just click on Immediate Connect, and this will lead you to a well-reputed trading platform that offers a range of solutions to find a better roadmap to make dollars from crypto.

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  • Crypto prices surge via strongest rally in 9 months, but why?

    Crypto prices surge via strongest rally in 9 months, but why?

    Key Takeaways

    • Bitcoin is back in the 20s, Ethereum has crossed $1,500 and altcoins are powering north in what is the biggest crypto rally in 9 month
    • Optimism that Federal Reserve will pivot off high interest policy sooner than expected, following cooler inflation data
    • Next big day for crypto markets is February 1st, when the Fed will decide on the latest interest rate policy
    • Solana is up 130% since the start of the year, leading the altcoins
    • Even memes are rising, with Dogecoin and Shiba Inu again making moves
    • Some analysts fear the market is premature in pricing in an earlier-than-expected Fed pivot

     

    Crypto markets are dishing out a heavy dose of nostalgia to start the year, off to their strongest rally in 9 months.

    Bitcoin is trading close to $21,000, Ethereum is at $1,500 and altcoins are powering aggressively upward, too.

    I took a snapshot of the market on this day last week, when markets had bounced to start the new year. One week later, the direction is the same – but the rally has been taken up a notch. The below chart presents crypto price returns to start the year, a sea of upward moves:

    What is causing prices to rise?

    Over the past year, inflation has perhaps replaced pandemic as the dirtiest word in our vocabularies. But it is for good reason, with the globe gripped by an inflation crisis the likes of which we haven’t seen since the 1970s.

    But in the last few weeks, just a little bit of optimism that inflation has peaked has seeped into the market. This has led to investors betting that the Federal Reserve will peel away from interest rate rises sooner than previously expected. And the markets are doing something that most people forgot they could – they’ve gone up. 

    The market in general has risen. The S&P 500 is up close to 5%. Crypto prices can throw up a 5% candle in a matter of minutes, but the stock market is obviously less volatile, and 5% amounts to a strong move – there were only four occasions throughout what was a very volatile 2022 when the market rose by this much in a week.

    Interest rates hold the key for the crypto markets. Altcoins trade like levered bets on Bitcoin, and Bitcoin has been trading like a levered bet on the S&P 500 over the last year or so. Ever since interest rates began to be hiked in April 2022, the Bitcoin price has been freefalling.

    While there have been wobbles drawn from the crypto market itself (the LUNA death spiral, Celsius crash and staggering FTX debacle spring to mind), the key variable is undoubtedly tight monetary policy suppressing the value of all risk assets. Bitcoin will not be allowed to rise until the Fed pivots, and this past week has seen investors move towards a stance that expects that pivot earlier than previously.

    Will it continue?

    The next key date is February 1st, when the Federal Reserve will meet to decide the latest interest rate policy. These FOMC meetings, alongside the monthly CPI report, have been the key drivers in markets over the last year.

    I wrote five days ago about how we would get volatility to end the week as we ran into the CPI report. That report came in as anticipated, but reflected another month of falling inflation, which as described earlier propelled markets upward.

    Nonetheless, the surge in prices is somewhat surprising when considering the words that have thus far come out of Fed chairman Jerome Powell’s mouth. He has been adamant that a pivot is not coming and has even taken swipes at the market’s perceived premature assumption that monetary policy will be loosened again.

    Indeed, there had been plenty of false starts in the market over the last year, with investors repeatedly betting that the Fed was bluffing over the extent and speed that interest rate hikes would be implemented. This is part of the reason that the subsequent move downward has been so fierce.

    In truth, the below chart paints the picture better than a thousand words:

    Altcoins making greater moves

    As we have seen repeatedly throughout crypto history, the higher-beta altcoins are printing gains significantly higher than Bitcoin. Of course, this comes from a lower base – the downside of higher beta is that when times are tough, the pain is that much more severe, and altcoins have certainly experienced that throughout this crypto winter.

    The gains have been led by Solana, the Layer 1 that has had a tumultuous year even by crypto standards. I wrote a deep dive on it two weeks ago, but the coin had plummeted from at one point holding the third spot behind Ethereum and Bitcoin to barely hanging on inside the top 20.

    A combination of repeated outages, top projects leaving for rival blockchains and a close connection with the disgraced Sam Bankman-Fried all contributed to Solana shaving 97% from its all-time high of $260, trading towards the end of 2022 at $7.70.

    But in typical crypto standards, a flip of sentiment led by the outright inexplicable meme coin BONK has helped to boost the coin, which is now trading at $23.40, having more than doubled in the last two weeks.

    Meme coins have been enjoying the gains across the board. This would normally be the part where I’d try input some analysis about why, but we know by now that there is no real pattern to the meme coin madness, so instead I will simply list the returns. Shiba Inu is up 29%, while the Daddy of them all, Dogecoin, has added 20% and is now trading at a market cap of $11.2 billion.

    What happens next?

    For now, investors are enjoying the gains, having simply tried to survive throughout 2022. But in looking at the market, while prices have soared, volatility remains low and volumes are still way off what they were during the pandemic.

    The market has been uncharacteristically serene since the FTX implosion, and this is the first real move of any significance. While optimism is obvious, investors remain somewhat cautious and prices are still extremely suppressed from this time last year.

    A 75% fall followed by a 20% rally still amounts to a 70% fall. So while the green candles are pretty this morning for traders – and long overdue – the scale of the damage to crypto here is still severe. Institutional adoption has likely been dented harshly by the myriad scandals, there is still the potential for more dominoes to fall in the FTX web of contagion, and macro/inflation remains highly uncertain.

    The last two weeks amount to some much-needed positive news not only for crypto, but for the economy as a whole. Investors are celebrating that with surging charts, but these are still uncertain times with many twists and turns ahead.

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  • What to expect in crypto ahead of inflation report, as Bitcoin banks eight straight days of gains

    What to expect in crypto ahead of inflation report, as Bitcoin banks eight straight days of gains

    Key Takeaways

    • Bitcoin has increased for eight straight days, now up 9.2% on the year
    • Period of low volatility in the crypto markets paired with softer inflation data has sent prices upward
    • Latest CPI report is out Thursday which will trigger volatility and is vitally important for the market following increased optimism over last month or so
    • Altcoins could move violently on the report, while Bitcoin will likely shake off its $18,000 mark if data comes in below or above expectation

     

    Bitcoin has banked eight straight days of price rises, as the new year has kicked off assiduously for cryptocurrency investors.

    Whereas 2022 brought nothing but pain and freefalling prices, 2023 has thus far been the exact opposite. Bitcoin is up above $18,000 and Ethereum close to $1,400, good for rises of 9.2% and 16.4% respectively year-to-date. Many altcoins are up even more.

    Volatility has reduced in the crypto markets

    The macro climate is pushing prices upward. I wrote a piece analysing the softer climate last week, but optimism has crept into the market that inflation may have peaked and that the possibility of a pivot from the Federal Reserve off its policy of heightened interest rates may be coming soon than previously anticipated.  

    It should be noted that while this is a nice rally, it is hardly a violent breakout. Cryptocurrencies are notoriously volatile and there has actually been an unusual serenity that has washed over markets over the past couple of weeks.

    A quick glance at the chart for the daily returns of Ethereum illustrates that there has been a perceptible fall in volatility.

    Inflation data to be released Thursday

    I write this on Thursday morning, with the all-important US inflation data to be released this afternoon. If we know anything by now, it is that inflation numbers rule the world. If there is anything in the current climate that will produce volatility, it is the CPI report.

    As mentioned above, this relief rally has largely been predicated on softer inflation leading to the hope that the Federal Reserve will pivot off its high-interest-rate policy sooner than anticipated. Another positive inflation number would give further impetus to crypto prices. It is not hard to imagine Bitcoin pushing up towards $20,000 and Ethereum to $1,500 if the number comes in cooler than anticipated.

    On the flip side, of course, is the potential for the number to disappoint investors. Following two straight months of positive inflation, a step back this afternoon would be a body blow for crypto, and it would not be a surprise to see it drop sharply as all the optimism of the last month gets released in an instant.

    The inflation number is expected at 6.5%. This would be a decline from the prior month of 7.1%. Should the number come in at 6.7% or higher, this would represent a major disappointment and crypto will likely freefall. Do not be surprised to see Bitcoin down at $16,500 in this scenario.

    The data will be released at 1:30 PM GMT (8:30 AM ET), and it is the last CPI report before the Federal Reserve’s February 1st interest rate decision.

    Altcoins showing signs of life

    However bad things have been for Bitcoin and Ethereum, the landscape has been a hell of a lot worse for altcoins. Below are the percentage returns in 2022 from the top 10 coins as of 1st January 2022.

    As is standard, these coins are significantly more volatile, and trade like leveraged bets on Bitcoin. It follows that this year, the jumps have also been stronger than the number 1 crypto. 

    Looking at the top 10 coins from Jan 1st this year, some of the returns have been seismic, albeit from a significantly lower base. Remember, a 90% drop followed by a 50% rise is still the same as an 85% drop from the original starting point. A simple math problem that many investors do not understand. Hence, the past couple of weeks have been positive, but this is still a space that has been absolutely ravaged by the bloodbath that was 2022, and it will take a very long time to recover from. 

    Final thoughts

    This is a pivotal week for the markets and it will be a true gauge of how far the battle against inflation has come. Central banks have been adamant that inflation is the number one priority, and the consequent interest rate policy has crushed risk assets over the last year.

    Things are tough in the markets, but with a third straight month of OK inflation data, it could point toward a light at the end of the tunnel. Then again, the world is teetering on the edge of a recession as it is, and if inflation takes a step back, it will be a double whammy of high rates and still-persistent inflation. As always, risk assets will feel the pain. 

    Crypto investors will just have to hope that the pivotal CPI number doesn’t dare tick up beyond 6.5%. 

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  • Its the calm before the storm in crypto markets

    Its the calm before the storm in crypto markets

    Key Takeaways

    • Crypto volatility has come down and extreme on-chain activity subsided in period of relative calm
    • Several concerning developments around Genesis, Gemini and DCG are still ongoing, however
    • Volatility could also spark up once the US inflation data is revealed this week
    • Period is reminiscent of the low drama environment pre-FTX in October 

     

    After a tumultuous rollercoaster following the shocking demise of FTX, a period of notable serenity has descended upon cryptocurrency markets. 

    With 2022 being a complete and utter bloodbath, it almost feels suspicious that there is even a couple of weeks of low drama in the digital market space. 

    But the metrics show that the last few weeks have been among the quietest of the last couple of years. Given the fear of contagion that transpired out of FTX’s collapse, that is a good thing. 

    Fear still elevated in crypto circles

    Having said that, there is plenty to be concerned about right now. As Coinbase CEO Brian Armstrong stated yesterday when he announced Coinbase was cutting an additional 20% of its workforce, there are likely “more shoes to drop” and there is “still a lot of market fear” out there. 

    Crypto lender Genesis last week laid off 30% of its workforce and is reportedly mulling bankruptcy. Crypto exchange Gemini, founded by the Winklevoss twins, has $900 million of customer assets stuck in limbo with Genesis, its sole lending partner for its Earn product. 

    The twins have demanded Barry Silbert, CEOP of Digital Currency Group (DCG), which owns Genesis, to step down, accusing him of defrauding Gemini Earn customers. 

    DCG fired back, calling it “another desperate and unconstructive publicity stunt from Cameron Winklevoss to deflect blame”. It also affirmed it was “preserving all legal remedies in response to these malicious, false, and defamatory attacks).  

    DCG is also the parent company of the Grayscale Bitcoin Trust, which has seen a massive discount to its net asset value, peaking at 50% in the aftermath of the FTX collapse as investors questioned whether reserves were safe (I wrote about GBTC yesterday).  

    Markets stand firm for now

    For now, while all these episodes play out, the markets are standing firm. Action has been relatively muted, and in fact there has been a tangible return to normal levels for a lot of on-chain activity that went wacky over recent periods. 

    The below snapshot shows the net transfer volume in and out of exchanges. Since the start of the year, the action has been tepid, having spiked to extreme levels in November and December as first FTX collapsed and then the questions spiked about the health of Binance. 

    This notion that activity has returned to normal is reinforced when looking a the volatility of Bitcoin. The world’s biggest cryptocurrency has been trading sideways for a while now, and the 30-Day Pearson measure of volatility shows how there was a perceptible drop back down to pre-FTX levels in December. 

    Macro climate looking more optimistic

    It hasn’t just been a respite from within crypto circles. The broader macro environment is looking at least a bit brighter today than it did last month. Inflation is still rampant, but there have been two consecutive readings below expectation, and there is renewed hope that it may have peaked.

    The most recent round of interest rate hikes kicked rates up 50 bps as opposed to 75 bps in the two prior months, and while Fed chair Jerome Powell and other central bank chiefs have affirmed that rates will continue to rise until inflation is conquered, the market has moved cautiously upward after European inflation came in at 9.2%, compared to 10.1% last month.

    Next up is the US CPI reading on Thursday, which will – as always – be a vitally important day in markets. Expect volatility in crypto markets as coins stare at the number to try to assess what Jerome Powell may do with regard to interest rate policy.

    After all, we know by now that crypto is very much holding the stock market’s hand – apart from when, you know, high-profile executives are revealed to be fraudulent (FTX), or top 10 coins cease to exist (LUNA).

    Never a dull moment for long in crypto

    Back in late October, Bitcoin was seemingly locked in crab motion around $20,000. With traders getting impatient, I warned how crypto could be one event away from a nasty downward wick. T

    Three weeks later, FTX collapsed. I never imagined this would happen, and the timing was coincidental, but the premise of the piece reminds me of how I feel now. It’s amazing how short memories are in markets, but we have been here before.

    Crypto won’t stay silent for long, and the asset class is far from out of the woods yet. The aforementioned ongoings around DCG, GBTC, Genesis and Gemini are just a few of the million things that could turn south at any moment.

    There is also the story around Binance chief Changpeng Zhao being under investigation for money laundering offences by the SEC, there is Coinbase laying off 20% of its workforce following a 905 drawdown in its share price, and God knows what will come out of testimonies in the Sam Bankman-Fried court proceedings.

    And then there is macro, where anything could happen to inflation, the Russian war in Ukraine or myriad other variables. It’s been a quiet couple of weeks but don’t worry – the madness will return soon.

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  • BONK price action spells trouble after becoming an overnight crypto sensation.

    BONK price action spells trouble after becoming an overnight crypto sensation.

    • Bonk token launched on December 25, 2022

    • The cryptocurrency rose by four-digit percentages after the launch

    • BONK price has cooled and trades on a descent and could claim lower levels

    Crypto has always treated its fans with twists, turns, and surprises. The crypto community loves it this way, for it becomes a time to make quick bucks as the rest of the market sleeps. In 2022, we were treated to a wild launch of the ApeCoin. Before the dust settled, Optimism airdrop came with a thud! The year couldn’t end in a better way for crypto fans than it did with the Bonk token (BONK/USD).

    If you are a fan of meme tokens, then BONK does not miss your watchlist after a heroic entry into the crypto space. Launched on December 25, 2022, BONK has been a sensation, jumping by four digits percentage in price. The token also dominated social trading platforms. Analysts credited the popularity of the newly dog-themed token to the Solana community. The former is based on the Solana network.

    Nonetheless, if history is indeed a good teacher, then we should learn that the gains may not last forever. We have seen highly hyped launches boosting token prices, only for them to crash thereafter. BONK may not be an exception. As of press time, the meme cryptocurrency had lost at least 50% of its value from its all-time high. Typical of the phrase, if you didn’t board early, don’t do it now. Technical pointers show BONK could fall further.

    BONK on a decline as price finds minor support

    BONK/USDT Chart by TradingView

    From the 4-hour chart outlook, BONK trades nervously at a support zone. The highs to the upside have been lower, coinciding with a declining price. Buy-side volumes have improved slightly at the support, but not sufficient to boost BONK’s price.

    BONK price prediction

    As the hype around the BONK launch dies, the price could continue falling. Investors may look at BONK as an overvalued asset. Profit-taking and panic selling may also be at play and force a bearish breakout. 

    Where to buy BONK

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  • Why are crypto prices rising? 2023 off to hot start

    Why are crypto prices rising? 2023 off to hot start

    Key Takeaways

    • Crypto markets have jumped to the start the year off positive macro news
    • Next inflation reading is out on Thursday, which will cause further volatility
    • Fight against inflation has long way to go, with investors not out of woods yet
    • Solana has risen 65% since New Year’s Day, but fell drastically prior and problems remain

    After what was, to put it mildly, a rather disappointing year in cryptocurrency in 2022, the new year has jumped out to a positive start.

    Bitcoin, Ethereum and all their other friends got ravaged last year, but nine days into 2023 there is green on the board. Let’s look at why this is, and whether we will see more of the same, or if price action will reverse back to the 2022 pain.

    Macro provides impetus for crypto run

    The single biggest reason for the cryptocurrency jump this year is the same reason that pulled the entire space down last year: macro.

    The stock market has had a positive start to the new year. This comes off the back of inflation readings around the globe coming in lower than expected. While there is still a hell of a long way to go in the battle against this rampant cost of living crisis, the latest data has given investors hope that central banks may pivot off their policy of high interest rates sooner than previously anticipated.

    After a decade of low interest rates, the world transitioned to a new interest rate paradigm in 2022, as rates were hiked aggressively in response to the inflation crisis. This was aimed at reining in demand and ultimately spiralling prices. As a result, all risk assets peeled back, and there is nothing riskier than crypto. So, down the market went.

    Solana decouples from market

    Of course, while macro is clearly the big driver here, there still remains idiosyncratic risk and happenings in the crypto space. Look no further than last year, when three events (Luna, Celsius and FTX) caused large dropdowns and deviations from the stock market, which otherwise displayed extremely high correlation with Bitcoin.

    To start the year, we have seen Solana streak out ahead of the crowd, printing a remarkable 65% return thus far, having opened the year at $10 and now trading at $16.50.

    I wrote a piece last week diving deep on Solana, but suffice it to say the coin has big problems. Between repeated outages, has seen several big projects flee the blockchain and has also suffered as a result of its close ties with the disgraced Sam Bankman-Fired. The below chart shows that while this rebound seems large at 65%, it is still a drop in the ocean compared to the freefall it has experienced.  

    This rise over the last week may be at least partially attributed to Bonk, the latest meme coin phenomenon which I also analysed last week. We know by now not to read too much into doggy tokens, but nonetheless, the rise has at least eased some of the pain for Solana investors.

    What Bitcoin continue to rise?

    As for the future, that is anyone’s guess. The next big day is Thursday, when the latest CPI figures are revealed. If inflation in the US comes in softer than expected, you can expect markets to rally upwards on renewed hope.

    It really comes down to the same thing it has for the last year: the crypto markets will only meaningfully rebound once the Federal Reserve pivots away from its currently-hawkish interest rate policy.

    In turn, the Fed maintains that rates will continue to rise as long as inflation is elevated. With the employment market still tight and core inflation remaining stubborn (the headline rate has partially fallen due to energy prices, whereas core inflation is typically the number that lawmakers focus on), there is still a long way to go.

    Ultimately, 2023 in the crypto markets will likely be decided based on what happens with this tussle between the Fed and inflation. Until that much-fantasised-about pivot actually occurs though, it could remain a tough time for digital markets.

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  • 73% less Bitcoin millionaires than a year ago, as crypto losses top $2 trillion in torrid 2022

    73% less Bitcoin millionaires than a year ago, as crypto losses top $2 trillion in torrid 2022

    Key Takeaways

    • Cryptocurrency industry was valued close to $3 trillion entering 2022, now it is $800 billion 
    • There are 73% less Bitcoin millionaires after 2022
    • Bitcoin has pulled back 75% from its all-time high fo close to $69,000
    • 25% of the bitcoin supply was in a loss entering the year, now it is over 50%
    • Number of investors holding greater than 1 BTC jumped 20% as the hurdle became much more attainable

        

    Once upon a time, the cryptocurrency market was valued at $3 trillion. To be precise, this was in November 2021, when Bitcoin traded at its all-time high of close to $69,000.

    But then along came 2022. Inflation sparked as a result of the COVID money printing, war in Ukraine and supply chain issues, meaning central banks worldwide were forced to hike rates to curtail a spiralling cost-of-living crisis.

    With the cheap liquidity pulled out from under markets, Bitcoin – and crypto as a whole – felt the pinch. We have seen top 10 cryptocurrencies collapse, one of the top exchanges revealed to be a house of cards and numerous other bankruptcies and scandals. 

    The loss has been greater than $2 trillion, with Bitcoin shedding three-quarters of its value as at the time of writing, trading at $16,800.

    Bitcoin millionaires

    Looking at on-chain data from bitinfocharts.com, Bitcoin millionaires have dropped like flies. Entering 2022, there were 90,000 addresses containing over a million dollars worth of Bitcoin. Today, it is 24,000 – that amounts to a fall of 73%.

    “The on-chain data sums up what is glaringly obvious from looking at a Bitcoin price chart – that the party is over and investors are no longer dreaming of retirement off their Bitcoin holdings, in the near future at least! Nearly three-quarters of Bitcoin millionaires losing that status is perhaps the best piece of data of all to summarise how ugly 2022 was for investors” said Max Coupland, Director at CoinJournal. 

    Percent in supply in loss doubles in 2022

    Bitcoin’s returns before 2022 were astonishing. As a result, the bulk of the supply was in profit, with only 25% of the supply loss-making entering the year. By year-end, this had doubled to over 50% – another stunning statistic when considering that Bitcoin was the best-performing asset class in the world over the prior decade. 

    Addresses holding greater than 1 BTC

    On the flipside, with Bitcoin being so cheap compared to last year, the number of addresses containing one Bitcoin or greater – “whole coiners”, as they are known – is at all-time high, even if the dollar value contained in those addresses is way down. 

    Entering 2022, there were over 814,000 addresses holding more than 1 BTC. By the end of the year, this number was over 978,000 – that is a rise of 20%.

    As can be seen when zooming in on 2022 on the below chart, there were significant jumps when Bitcoin plunged off the back of the three major scandals of 2022 – Luna’s death spiral, Celsius’ insolvency and the revelations of fraud at FTX. 

    Dropping sentiment matching falling prices

    Perhaps the biggest problem emerging from 2022 is related to these scandals. The reputation of crypto has taken a hammer blow, most notably with the shocking downfall of FTX and disgraced former CEO Sam Bankman-Fried. 

    According to a CNBC survey as of November 2022, only 8% of Americans now have a positive view of cryptocurrency. 

    Crypto investors have seen similar percentage declines before, of course, only for the market to bounce back. But this time, crypto is fighting against a pullback in the wider economy for the first time in its history. 

    Until now, it had been zero (or negative) interest rates and a warm money printer. Now, we have transitioned to a new environment, and crypto investors are feeling the pain. They will hope that 2023 can bring a return to prominence and start mending the reputation of the wounded asset class. 

    If you use our data, then we would appreciate a link back to https://coinjournal.net. Crediting our work with a link helps us to keep providing you with data analysis research. 

    Research Methodology

    Address data taken from on-chain. Price data from Yahoo Finance. 

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