Bitcoin suffered from hefty losses, which were enhanced by Russia's central bank proposal to ban cryptocurrencies and mining. While Bitcoin was able to post some recovery off its lows, are we in front of a moderate recovery?
During the crypto meltdown stablecoins saw moderate increases in trading volumes. Stablecoins are cryptocurrencies that strive to maintain a stable market price. USDT (Tether), a stablecoin that was launched in 2015 is considered by many an alternative to the US Dollar. Tether is pegged to the US Dollar.
According to Kaiko, Binance's volumes in BTC have dropped dramatically since 2018. At its peak bitcoin held 90% of the volumes and is currently orbiting at around 10%.
source: Kaiko
Additionally, data revealed investors realized their long positions, which accelerated the sell-off in BTC. It is worth noting that USDT remained very stable in terms of trading volumes.
It has been reported that $2.5 billion of crypto-related transactions were made via Visa in the first fiscal quarter of 2022. Despite the recent volatility, the demand for cryptocurrencies is still present.
Crypto Regulations
Despite the recent recovery, one of the main concerns are regulatory measures. The Russian government is currently heading for regulating the crypto markets instead of a complete ban (as proposed by the central bank). Putin stated that he backs crypto mining as it provides Russia with a competitive edge in the field.
Fitch credit rating agency warned that banning cryptocurrencies may curb innovation and negatively affect Russian banks' technological development.
It has been speculated that the Biden administration will issue an executive order on cryptocurrencies as early as next month. The speculations suggest cryptocurrencies are viewed as a national security threat by the US administration.
Biden's approach to cryptocurrencies may hold the key to whether Bitcoin and other cryptocurrencies will be able to recoup losses. It is important to note that aside from cryptocurrencies, NFTs are expected to be regulated as well.
Bitcoin Forecast, Will It Bounce?
From a technical angle, it is a struggle to see the gold at the end of the rainbow. Despite recent gains in BTCUSD, the price must firmly break above $42,000. Based on the BTCUSD daily chart, the price is painting lower highs and lower lows, which may be a distinct sign of an established downtrend.
Before the regulations kick in, we may witness more partnerships and decentralized exchanges (DEX) in the market. While the technical outlook is based only on the daily chart (short-term), such news may have a positive effect on bitcoin.
At the time of writing, BTC Long / Short ratio is almost identical with a slight inch towards long positions:
source: Coinglass
The shutdown of crypto miners in Kazakhstan is expected to end in February. The state electricity provider, KEGOC blamed crypto mining for the large outage that took place in the country.
As opposed to crude oil (nymex) where the price lifts when rigs are shutdown due a hurricane, a resumption of crypto mining may contribute to BTC recovery. Though, it may take a couple of weeks for the impact to seen.
Moreover, Armenia is making an old thermal plant available for the purpose of crypto mining. The old plant is to be rented to industrial firms that wish to use the plant for mining cryptocurrencies.
With time, crypto mining outages and resumption of mining may play a role in strategic fundamental analysis of cryptocurrencies.
Summary
To summarize, while the short-term trend for Bitcoin may be bearish, the broader fundamental outlook is suggesting some recovery. Partnerships may be fundamental drive for short-term volatility, which may increase until regulations are implemented. BTCUSD is trading at $37,830 at the time of writing.
