“Buying at the top does nothing to increase your profits,” notes analyst Mike Ermolaev, head of public relations at ChangeNOW. For the expert, it was to be expected that after a year of profits and records, cryptocurrencies would go through a turbulent moment and there are several external factors that underpin a decline in the price of the main cryptocurrencies in the market.
The reasons why Bitcoin would rise
The analyst highlights that China’s crackdown on the crypto industry, the Federal Reserve’s decision to raise interest rates, which triggered a sell-off in the tech-heavy Nasdaq, and a political crisis in Kazakhstan were some of the the main catalysts of the market decline in recent days.
“The Chinese government has been limiting the use of digital currencies for several years, but its most recent crackdown has banned all cryptocurrency trading and mining in the country. The new Chinese regulation targets ICOs. In a most recent move to To restrict cryptocurrencies, China has ordered the closure of Bitcoin mining in its Sichuan province, as well as instructed banks to stop supporting cryptocurrency transactions.The country’s central bank has banned all cryptocurrency transactions “, he highlights.
In the case of Kazakhstan, he notes that miners exiled from China flocked to the country, which welcomed them with open arms, as the Kazakh government hoped its cheap and abundant coal power would attract the mining industry and help thereby generating income for the country.
Thus, according to the Center for Alternative Finance in Cambridge, Kazakhstan became the second country in the world in which cryptocurrencies are mined the most, after China took measures against the sector in 2021.
“The exact number of BTC minted in Kazakhstan is difficult to calculate. The country accounts for 18.1% of global electricity consumption according to the Cambridge Bitcoin Electricity Consumption Index (CBECI) as of August 2021,” it notes.
The analyst points out that during the revolt in Kazakhstan, which began on January 2, the Internet in the country was closed, which caused the calculation capacity of Bitcoin to plummet. Within hours of the outage, The Block’s Larry Cermak tweeted that 12% of Bitcoin’s global computing power was gone. But the Internet has already been restored.
The executive also highlights that, along with the reduction in cryptocurrency prices, there has also been an increase in the supply of stablecoins and that it seems that this will continue in the short and medium term.
“The Stablecoin Supply Ratio (SSR) chart shows the lowest value since July 2021, signifying a high supply of stablecoins compared to the market value of Bitcoin and indicating that investors are turning to them as a hedge against volatility. … Right now, I don’t expect a one-year correction like what happened in 2018,” he said.
According to him, all these events have helped pull Bitcoin down, however, keep in mind that the critical support line for BTC is at $31,000 and only if the price falls below this level, we can talk about bear market. “For the rest, we are witnessing a correction and there is nothing to worry about,” he said.
Therefore, he points out that investors often fall into the trap of waiting for the sweet spot and never acting or selling. “The goal is not to top out perfectly, but to capture the essence of the movement. There’s never any reason to be afraid of cashing in on your positions. Just some food for thought. And lastly, you may not be so concerned about the current decline of Bitcoin if you focus on the fact that it has skyrocketed over 5,000% in the last five years,” he concludes.
Source From: Ambito
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