Crypto Weekly: Bitcoin Begins The New Year With A Serious Drop

Jan 10, 2022
12:01
2 min reading

Choise.com team

The main reason for the cryptocurrency market fall was the news from the FED about raising the base interest rate at a quicker date. This decision will be made to solve the inflation problems and strengthen the economy. The stock market also reacted negatively to the announcement and the largest indices went down by 2-3% in a day. Although this initiative addresses implicitly the crypto industry, overall market sentiment has become even more bearish.

On January 3, many crypto enthusiasts celebrated Bitcoin’s birthday. On that very day in 2009, Satoshi Nakamoto launched the main Bitcoin network and mined the genesis block. Thus, the first cryptocurrency has already turned 13.

After a few days, the market analysts noted a significant one-day drop by almost 15% in the Bitcoin hashrate. Later, it became clear that this happened due to the internet disconnection in Kazakhstan, where energy protests took place in early January. In this regard, the government decided to temporarily cut Internet access both through wireless and wired connections. This move naturally affected the miners, since about 15-17% of the world’s Bitcoin hashrate is concentrated in Kazakhstan, which ranks second by this indicator. The most affected pools were Kucoin, OKEx, and 1Thash.

However, some positive news regarding cryptocurrencies came from PayPal. At the end of the week, it was reported that the payments giant had planned to launch its own stablecoin linked to the US dollar. The company’s management says that, on this occasion, they are going to hold complex negotiations with regulators so as not to commit illegal actions. The PayPal Coin has already been mentioned in the PayPal code.

OpenSea, the largest NFT marketplace, announced that it had attracted another $300 million investment. The latest round was led by the investment venture funds Paradigm and Coatue. Thus, the current valuation of the company is over $13 billion. The raised funds will be used to develop new products, recruit staff and improve customer service quality.

Beginning of 2022 turned out to be negative for Bitcoin, as the price has already dropped by more than 10%. Let’s take a look at the chart of the first cryptocurrency and try to understand what to expect from it in the near future:

The chart has been in a downtrend for already 2 months, during which Bitcoin has significantly dropped by 41%. It is important to note that there were no price bounces, which indicates a high level of fear among the market participants.

On January 5, Bitcoin left the uptrend and consolidated below it, dropping to the major support level of $40,500 over the weekend. Depending on what happens to the price around this level, it will become clear what to expect from Bitcoin.

At the moment, there is a high probability of a further fall. We may see another 10-15% decline, representing an avalanche downward movement due to a large number of stop orders triggering massive sales at the price below $40,000. So, Bitcoin may plummet to the $37,500 area.

In case of this scenario, the rest of the market will be in a panic, which will lead to the majority of market participants selling their altcoins and thus lowering the prices. The Bitcoin dominance also signals in favour of this situation, which may become obvious already in the coming week.