PTGR FEBRUARY HIGHLIGHTS
Dear valuable clients,
Please find the following key insights from our aggregated research:
Overall Take-Home Message:
The Bitcoin price continues to consolidate between $22,700 and $24.000, with a rise in price since November of last year. On January 21, 2023, it achieved the vital $23,000 threshold for the first time in the previous five months. Over $24 billion is being traded daily in bitcoin as of this writing. Experts were watching the Fed meeting in the United States, which didn’t have much effect on Bitcoin’s price movement .
It should be remembered that the Bitcoin price began to rise as it crossed the critical threshold of $16,800. Once more gaining momentum, the price has been displaying positive signs up to this point. Let’s look at the current picture that technical indicators are showing:
Levels of Support: $22,700
Levels of Resistance: $22,900.
The fact that 2024 will be the year of Bitcoin’s half event is one of the reasons why analysts are positive about the cryptocurrency. Every four years, there is a Bitcoin halving event in which the currency’s miner payouts are cut in half (the miner payment will be decreased to 3.125 BTC). Given that halving serves to reduce supply, this occurrence is widely seen as being favorable for Bitcoin’s price. In the past, halving has been viewed as a highly positive indicator for boosting Bitcoin’s price.
Large investors have resumed their BTC investments. The major Bitcoin whales are keeping between 1,000 and 10,000 BTC in their wallets, according to data from on-chain aggregator Santiment. This shows that investors have been stocking up on BTC, which may be a hint of a recovery in the price of Bitcoin.
NEWS UPDATE OVERVIEW
1) What happened in January?
The year-long fight for survival of the mining ecosystems has begun to pay off as Bitcoin demonstrates a tiny bull run. The Bitcoin mining community saw a 50% rise in revenue from mining awards and transaction fees in the first month of 2023. Bitcoin mining income fell to $13.6 million on December 28, 2022, for the first time since October 2020. This, combined with increased energy prices during geopolitical tensions, put enormous financial strain on mining enterprises, causing some to close. As Bitcoin remains well-positioned for a sustained recovery, the mining business saw a 50% increase in income in US dollars this month.
BTC/USD is up more than 40% year to date after reaching its best weekly closing in over six months. Bitcoin has outperformed predictions this month, making January 2023 its best month in a decade. As incredulity flooded the market, fears of an impending crash and even new global BTC price lows persisted. That bleak turnaround has yet to materialize, and the following days might be pivotal in Bitcoin’s long-term direction.
Over the past 18 months, 2,846,703 ETH has been burnt. That represents a loss of $4.6B in ETH from the supply. Changes were made to the system of gas fees and the compensation of miners in EIP-1559. It first became effective in August 2021. Before EIP -1559, Ethereum users would engage in competitive bidding to get miners to finish their transactions. Everyone else would have to wait until the highest bidder would be chosen first.
This was altered by EIP-1599’s introduction of a flat cost. Users often pay this amount to get their transactions processed at that time. It also unveiled a brand-new burning system. The basic charge is deducted from the available supply of ETH and burnt. Therefore, a portion of each Ethereum transaction is burned in accordance with EIP-1559. Over the past 536 days, slightly less than 4 ETH have been burned each minute.
The Metaverse discussions in Davos 2023 Switzerland
The metaverse has gained popularity over the past year both inside and outside of the Web3 community. Furthermore, despite the general chaos in the decentralized space, development in the metaverse has continued to be robust.
It was also be a big subject at the WEF in Davos, Switzerland, in 2023. With the help of over 120 participants, the WEF has been building its own project, “Defining and Building the Metaverse,” for which it hosted a press conference on January 18.
One of the panelists and the deputy minister of cabinet affairs for strategic affairs in the United Arab Emirates Huda Al Hashimi told the conference “The metaverse will be part of our lives whether we like it or not.” The three panelists shared a similar five-year outlook for the metaverse, which included more transparent governance frameworks and integration into most people’s daily lives.
And more Metaverse news happened this month with a major leak of an Apple headgear providing fresh information and validating past rumors. According to reports, among other features, Apple’s potential XR headset contains a simple dial for switching worlds.
The headgear is believed to include more than a dozen built-in interior and outward cameras in addition to two LiDAR scanners for both short and long distances, which can even identify the user’s legs. The headgear is claimed to be focused on XR video conferencing with lifelike avatars that faithfully replicate face and body gestures in addition to teaching. Based on the sensor data that is currently available, an AI procedure will estimate the avatar’s brow and jaw motions.
In the crypto world, sustainability is gradually taking over as the guiding principle. To use less energy and protect the environment, Ethereum switched to the PoS consensus process last year. The similar kind of action has also been taken by other industrial projects for example Crypto.com that has been dedicated to a more sustainable future for some time now. Climeworks is a Swiss firm noted for its carbon dioxide air capture technology and has large DAC+S plants in Iceland and Switzerland has made a 8 year carbon renewal agreement with Crypto.com. Top firms such as Microsoft, Stripe, and Shopify are said to have partnered with Climeworks and purchased future carbon removal services from them.
2) Where do we stand?
After recording their worst yearly returns since 2018 last year, Bitcoin and Ethereum investors were in desperate need of some comfort. The strong January performance has delivered just that. A wave of bankruptcy filings in the cryptocurrency sector and a decline in the value of numerous well-known cryptocurrencies were the results of the crypto winter that was brought on by rising interest rates in 2022. Ethereum saw a year-end decline of 67% while Bitcoin experienced a 64% decline.
The Biden administration is still exerting pressure on Congress to give financial authorities more power to oversee cryptocurrency exchanges. Bullish Global, Circle Internet Financial, eToro Group Ltd., and Galaxy Digital Holdings Ltd. are just a few prominent crypto-related businesses that the SEC has recently prohibited from going public or from listing on significant U.S. exchanges.
Investors in cryptocurrencies should keep a careful eye on the Fed, according to Ryan Dunn, a certified financial advisor and wealth manager at Novi Wealth. According to Dunn, their choice will probably determine the price of cryptocurrency. Cryptocurrency prices might simply revert and begin to decline once more if the Fed hikes rates more quickly or for a longer period of time than the market expects. However, Dunn asserts, If the Fed entirely pauses, we will probably see a sustained surge. The consumer price index (CPI) inflation reading for January and the core personal consumption expenditures price index (PCE) inflation reading for January, both of which will be released on February 14 and February 24, respectively, might cause substantial volatility in the cryptocurrency markets.
Several significant events that may impact the cryptocurrency market in February might determine whether or not the January comeback lasts. More than 200 presenters will be featured at the European Blockchain Convention, which runs from February 15 to 17 in Barcelona. They will discuss the future of blockchain, NFTs, decentralized banking, and Web 3. In addition, the tenth annual Blockchain Life forum takes place in Dubai on February 27 and 28. The macroeconomic data and monetary policy choices have a great deal of influence on the cryptocurrency markets. At the conclusion of its meeting on February 1, the Federal Open Market Committee (FOMC) increased interest rates by an additional 25 basis points.
There are many opinions and forecasts about Bitcoin, some of which are bullish and some of which are gloomy. Where Bitcoin will go next can only be determined with time. Bitcoin has a significant capability for comebacks and is renowned for being robust. Several seasoned analysts have been predicting that the Bitcoin bubble would pop within the next decade. But the cryptocurrency’s poster child is still a favorite among many people and has helped investors amass substantial riches over time.
On Chain Data:
After a lengthy, taxing, and uncomfortable 2022, the negative trend during January has clearly reversed as the new year has started. Similar to the present surge, such rallies are frequently supported to some extent by short squeezes in the futures markets.
Three waves totaling more than $495 million in short futures contracts had already been settled, dramatically reducing in size as the rally drew to an end.
As can be seen, many traders were taken off guard by the initial short squeeze in mid-January, which led to a record-low long liquidation dominance of 15% (i.e., shorts accounted for 85% of liquidations). This shows the extent of the offside trading and is even larger than the long positions liquidated during the FTX implosion (75% long domination).
An Increase in Profitability
We’ll start by examining the realized earnings from the most recent cycle that the market has sequestered. Profit-taking may have surged after October 2020 as a result of unconventional monetary policies. This may be shown to have significantly dropped after the peak in January 2021, reducing over the next two years down to levels from 2020.
Realized profits have lately grown in response to recent price movement, but this growth has been more muted than during the intensity of the 2021–22 cycle.
The market’s losses over this same time period rose after January 2021, reaching a climax during the sell-off in May 2021. (A Bear with Historical Dimensions.)
However, it is clear that the present amount of realized losses has declined and is now nearing the cycle baseline of about $200M/day, with the exception of overt capitulation events (like LUNA / FTX).
We can identify structural changes in the relative dominance of the two by evaluating the ratio of realized profits to realized losses. A regime of losses that saw the Realized P/L Ratio drop below 1 with each consecutive price action capitulation followed the price action collapse following the Nov 2021 ATH.
But since the exit liquidity event in April 2022, we have already gone through the first sustained period of profitability. This might be the first sign that the profitability regime is changing.
Friday anomaly back?
Bitcoin has reverted to one of its old habits during this year’s boom: reporting large weekend fluctuations. This phenomenon has developed into a unique feature of the bitcoin industry.
BTC and the rest of the cryptocurrencies are tradeable continuously every day of the week, in contrast to the majority of other assets, which normally trade Monday through Friday on regulated exchanges. It has also been observed in cryptocurrency markets, where Bitcoin has been known to soar or fall when other assets are at rest.
Fridays have historically been a drag on performance since they peaked around the time when bitcoin achieved its all-time high, or approximately a year ago. The Friday oddity is back following the recent rise of bitcoin.
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