Bitcoin exhibits weakness but holds above the 20,000 mark – Cryptocurrency News
Bitcoin and other major altcoins have merely bounced back and remain comfortably above their recent lows on signs that inflation in the US is indeed cooling and the Fed might be able to scale down its monetary tightening later in the year. However, cryptocurrencies have started the week on the wrong foot as idiosyncratic risks stemming from within the crypto industry alongside the broader unfavorable macroeconomic conditions for risky assets continue to weigh on digital coins. The latest rangebound pattern observed in most cryptocurrencies is probably hinting that investors are scrutinizing the current complex market conditions and await significant macroeconomic developments to determine the direction of the next breakout.Bitcoin’s fortunes closely aligned with stocksThe major US indices witnessed a sharp comeback last week, with the Nasdaq 100 gaining 7.5%, while the S&P 500 was up about 6.5% for the week, experiencing its biggest single-day gain in two years on Friday. This relief rally was attributed to the University of Michigan’s monthly consumer sentiment index (CSI), which was revised lower.Cryptocurrency prices quickly caught up with the stock market’s advance, demonstrating once more the increasing correlation between cryptos and equities and shattering the idea that digital assets can act as inflation hedging tools.Systemic risks keep popping upBitcoin’s year-to-date decline has come in tandem with the stock market's downfall, which has been triggered by fears over global inflation and growth outlooks. Nevertheless, the former was exacerbated by regulatory woes, idiosyncratic risks of the digital asset universe and operational crackdowns among crypto financial service providers. On Friday, hackers stole the equivalent of $100 million in crypto assets from Harmony, a California-based cryptocurrency firm. After this latest theft, a blockchain analytics firm called Elliptic estimates that over $1 billion have been stolen so far in 2022.
Additionally, the Australian crypto exchange Banxa announced that it plans to cut over 70 jobs in anticipation of a steep market downturn, joining the gang of crypto firms that have already started reducing their headcount such as Coinbase, Crypto.com, Gemini and BlockFi. To make matters worse, numerous crypto companies are slashing their marketing and advertising budgets, even though the need to regain investors’ confidence in blockchain technology is more essential than ever.Mining activity remains a catalyst
At the current price levels, crypto mining is not attractive, and miners have started offloading their holdings on exchanges to cover rising costs in anticipation of lower prices. According to a Reuters report, the number of miners selling coins to crypto exchanges has been steadily climbing since June 7, which combined with the increasing liquidation of leveraged positions has accelerated the latest sell-off.
Furthermore, the amount of electricity consumed by the largest cryptocurrency networks has fallen by nearly 50% according to Digiconomist’s estimates as the crypto winter continues to erode miners' income and financial contagion spreads further throughout the sector. On the one hand, less supply could boost prices, but investors watching miners go out of business could also harm their sentiment toward cryptos’ growth prospects.Technical picture remains worrisomeAlthough Bitcoin's price managed to recover from its fresh 18-month low of 17,588, it remains below the 200-week simple moving average (SMA), which is essentially the bottom of all its previous bear market cycles.Should selling pressure intensify, the 2022 low of $17,588 may act as the first line of defense. Failing to halt there, the price would descend to form fresh multi-year lows and the next crucial barrier could be found at the August 2020 resistance of $12,500. To the upside, bullish actions might encounter initial resistance at the 200-week SMA, currently at $22,400. An upside violation of the latter may open the door for the $28,737 level, which is the 61.8% Fibonacci retracement of the 3,850-68,999 upleg.
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