Market-watchers have been obsessed with figuring out who is getting hurt during this year’s drawdown. Many retail investors and institutions had gotten in just over the past year or two. Bitcoin is now hovering around December 2020 levels.
The number of anonymous bitcoin addresses in the money, meaning those that acquired their holdings at prices below today’s, has reached lows not seen since March 2020, which analysts at Bequant say points to “capitulation.” Elsewhere, strategists at Glassnode say the $US20,560 to $US23,600 span is where the market might see a “full-scale capitulation scenario.”
Steve Sosnick, chief strategist at Interactive Brokers LLC, is watching the $US20,000-$US21,000 range because MicroStrategy, a large bitcoin holder, might have to offload some of its coins at that point. “We’ve taken out many of the prior support levels that we would have established since the run-up in late 2020,” he said in an interview. “When there’s this idea of a looming potential margin-call driven seller out there, yeah, the low $US20,000, that’s a real line in the sand.”
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Bitcoin hit a high of $US19,041 in December 2017, its last cycle. Matt Maley, chief market strategist for Miller Tabak + Co., says that level will be important to watch. It forms the “old” resistance level, which makes it a new key support. “When it broke above that resistance level in 2020, it skyrocketed higher. So, it needs to hold that level on this decline,” he said.
UBS’s Malcolm points to a number of hacks and outages, as well as regulators getting more serious about the crypto space. “None of this is to argue that crypto is going to slide into oblivion,” he said. “Yet what it does point to is how the future will look very different. Players will have to embrace regulation and collaborate with existing financial service providers.”
Chiente Hsu, co-founder and CEO at ALEX, a DeFi platform, strikes a hopeful note.
“Crypto is a high-volatility sector. So, we feel the ups and downs much more,” she said. “There will be projects gone, for sure, but crypto won’t cause systemic risk.”
Bloomberg L.P.
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