Bitcoin: While everyone is discussing the Tesla sale, the onchain data is worrisome
Bitcoin pulled back from Wednesday’s highs, losing all of its gains for the day and closing in the red zone. Today, the BTCUSD quotes remain under pressure, but until the support level of 21,900 is broken, it all looks like a pullback and may well end with confirming the indicated horizon as support followed by a rebound up.
An alternative scenario for the main cryptocurrency would be a return to the sideways 18,900 – 21,900 level, and then there is little to keep the price from falling. Meanwhile, the cryptocommunity is actively discussing the news of the day that Tesla sold its bitcoins, which probably caused yesterday’s drop.
Why Tesla sold Bitcoin
During Tesla’s quarterly report, it was revealed that the electric car company sold almost all of its BTC reserves, having only 25% of the bitcoins acquired during the 2021 bull market.
Tesla converted most of its bitcoin assets into fiat currency, earning about $936 million, which showed up on its balance sheet as “proceeds from the sale of digital assets.” The electric car maker now owns about $218 million in BTC.
Tesla CEO Elon Musk explained that the sale was not a “verdict on bitcoin.” It was a forced move because of liquidity problems. Also, parts shortages and delivery failures also led to further delays in production and deliveries. Musk also said that the company would be open to increasing its bitcoin assets in the future.
Tesla’s CFO explained the sale of BTC
Tesla CFO Zachary Kirkhorn said the sale was for “realized gains.” This means that the company sold the cryptocurrency at a higher price than it bought it.
However, he also pointed out that the bitcoins left on the balance sheet were worth far less than their purchase price, indicating that the drop in cryptocurrency prices was significant enough to offset the gain from the sale in the second quarter of 2022. Kirkhorn said the actual net result was $106 million for the company’s balance sheet.
Because Tesla’s brand is focused on sustainability, the high energy consumption of bitcoin mining was an issue. The CEO also explained that Tesla would reconsider opening this payment method if Bitcoin could move to a more sustainable energy model.
Bitcoin whale are selling Bitcoin
Miners also appear to have taken advantage of the recent upward price movement to make some profits. The balance of bitcoins held on trading platforms also shows a surge in inflows since July 12. The number of new daily addresses created on the network is decreasing. This indicates a lack of interest in bitcoins among outside investors at current price levels.
Increased open interest coupled with declining network growth and increasing selling pressure from whales and miners suggests that the recent upward price movement that Bitcoin has shown is due to leverage. These network dynamics increase the likelihood of a steep correction.
Around 630,000 addresses previously bought 524,000 BTC worth between $20,220 and $20,900. This demand zone must be maintained in the event of a downturn to prevent excessive losses. If the major cryptocurrency fails to hold that level, a sell-off could send it to around $16,000.
Bitcoin would probably need to close the daily candle above $23,660 to be able to rise higher. Breaking this important barrier of resistance could help BTC rise to $25,000 or even $27,000. However, as long as whales and miners continue to sell and the growth of the network slows, the threat of a steep correction remains.
Bitcoin onchain metric are stronger than ever
Galaxy Digital analysts published a report that examined key bitcoins onchain metrics (BTC), compared the world’s main cryptocurrency to other asset classes and explained what events could be the catalyst for the coming price rally. The company is confident that the bulls have plenty of reasons to remain optimistic – even despite difficult macroeconomic conditions.
BTC has become the best performing asset of 2023
Bitcoin is the best performing asset in 2023 compared to a lot of stocks, fixed income securities, indices, and commodities. It shows the best or some of the best performance over various time horizons (except for 1 year), and it looks even stronger over the long haul.
In addition, bitcoin’s correlation with the Nasdaq and S&P 500 stock indices has begun to decline, while its correlation with gold, which is considered a classic haven asset, has risen sharply. This happened against the backdrop of the crisis that engulfed U.S. banks and led to the closure of Silicon Valley Bank, Silvergate and Signature.
Given the nature of the current crisis, in which the system of partial bank reserves is tested for strength, the fundamental characteristics of the BTC favorably distinguish it from traditional assets.
Accumulation, not driving price rally speculation
A number of key market indicators indicate that bitcoin’s price rally is driven by the accumulation of coins on the spot, not speculation in the derivatives market. The futures funding indicator has remained virtually unchanged since the beginning of 2023 – meaning that the market is net-neutral regarding speculative positioning. The same can be said about volume and open interest in the CME.
The total number of addresses with non-zero balances also continues to grow rapidly, with more than 45 million wallets holding BTC today. At the same time, most of them have never spent coins, but only received new ones.
The approaching halving will affect the level of inflation in the BTC network
The next bitcoin halving will occur in April 2024 and will cause the network’s inflation rate to fall below 1%. The halving events of 2012, 2016 and 2020 catalyzed a price rally and reached a new all-time high as investor demand for BTC quickly exceeded the declining supply level.
This event will put bitcoin among the most stable assets and make it less susceptible to inflation than gold and silver.
Early we reported that Whales are interested in Litecoin, again.
Whales are interested in Litecoin, again: will it help LTC price return to the $100 mark
In February, Litecoin, albeit briefly, returned to the $100 level for the first time since the collapse of the Terra ecosystem in May 2022. In early March, the price of the asset dipped below the $70 mark again. But that didn’t seem to hinder the whales’ plans, as large holders actively bought LTC during the correction.
Whale activity continues to rise
According to analyst firm IntoTheBlock, the average LTC transaction size increased more than 600% in March 2023, from $13,355 to $81,022.
The increase in average transaction size as the price pulls back signals an influx of large investors looking to buy back the decline in the asset. Given the financial strength of the whales, this could push LTC to another rally in the coming weeks.
Litecoin price forecast – could reach the $110 mark
Santiment’s Market to Realized Value Ratio (MVRV) shows that investors who bought Litecoin in the last 30 days made a 10% profit. According to historical MVRV readings, LTC holders have often captured profits of around 20%. This means that the $100 level is likely to be the next resistance zone.
If the price of the asset can combine above $100, the coin may continue its upward movement towards $115. However, bears can reverse the situation if the LTC falls below $80. With further declines, LTC could fall back below $70.
Early we reported that China intends to work with crypto-businesses through Hong Kong.
China intends to work with crypto-businesses through Hong Kong
Hong Kong subsidiaries of major Chinese banks began to provide services for local cryptocurrency firms involved in projects related to Bitcoin, altcoins and various startups. It was reported by Bloomberg, citing sources in the region.
It is alleged that the local branches of Bank of Communications, Bank of China and Shanghai Pudong Development Bank have begun, or are working to provide banking services to crypto-businesses. According to the publication, a representative of an unnamed Chinese bank even visited the office of a crypto firm to promote the services of the financial institution. A top manager of an unnamed large Chinese bank said in a media commentary that banks promote their services in Hong Kong due to the tacit approval of Beijing. The interest in the business is also due to the uncertainty around lending to the local market, they said.
Loyal attitude to the market of cryptocurrencies in Hong Kong has already “bounced back” to local investors with considerable losses. According to calculations by local law enforcement agencies, the region lost over $200 million in 2022 alone. 2,336 cases of crypto-fraud were registered in Hong Kong in 2022.
However, Chinese authorities’ interest is not limited to the crypto market. In early March, the South China Morning Post reported that China intends to stimulate the digitalization of the economy in Hong Kong with its own currency. The authorities are offering citizens a 20% discount for making payments in digital yuan. At the same time, the promotion is valid only for Hong Kong citizens and only in the southern technology center of Shenzhen (connecting China and Hong Kong).
Recall that in the fall of 2022, Hong Kong authorities announced plans to develop a cryptocurrency market in the region. According to the Hong Kong government’s website, the authorities will work with local regulators to create “favorable conditions” for developing the local cryptocurrency industry.
Early we reported that Cryptotraders lost more than $250,000,000 in liquidations after Fed rate hike.
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