Fear is in the air and the price of Bitcoin is down 30% from its recent bounce to $41,000. Sellers have been relentless, likely due to three main factors.
China’s recent ban on bitcoin has made it nearly impossible now for Chinese citizens to interact with any cryptocurrency that isn’t their state issued one. This likely has turned anyone who was involved in BTC into a forced seller, including likely a lot of large holders and miners. While I believe this is in the long term a good direction for BTC to move away from autocratic states, in the near term; it creates a lot of selling pressure that previously didn’t exist.
It’s evident that many miners are being forced to shut down in China as the hash power (The total combined computing power of the Bitcoin network) has fallen 30%. This isn’t an issue other than creating a short-term slow down of transaction processing in the network. Bitcoin self adjusts its difficulty in order to keep the network in balance and transaction speeds reasonable. What this does imply however is that long time miners (often the largest and most consistent suppliers of BTC) are likely having to unload their supply at market now, adding pressure to the downside.
Tether continues to appear fraudulent, unaudited, and evasive of all regulatory bodies. Transparency cannot be had, and there is likely something to hide. Tether in theory is designed to be 1:1 backed by the dollar, but as I’ve mentioned many times before it is not.
Tether’s market cap [below] shows that it has more dollars behind it in market cap than many of the largest US companies, and its reserve breakdown would imply it is one of the largest holders of commercial paper with only 13 employees. It’s a bit strange for an unaudited, offshore institution.
It also should be noted that the price of Bitcoin hasn’t risen since this report was released.
An entity or group is accumulating shorts on Tether
I’m expecting prices as deep as 24-26k, with potential for a bounce around the 28k region. Buyers will step in when the dust settles.
Beyond that, while BTC is down about 30% this month, the algo is up 5%! I expect it to continue to navigate the market with agility and protect against the downside when it matters most.