Is Bitcoin on the Road to Recovery?
Are immediate gains on the horizon?
Crypto mining could play a crucial role in Bitcoin's rebound.
Bitcoin has experienced significant losses recently, further exacerbated by Russia's central bank proposal to ban cryptocurrencies and crypto mining. However, after hitting some lows, Bitcoin has managed to show signs of recovery. But the question remains: is this the start of a moderate rebound?
During the crypto market's downturn, stablecoins saw a slight increase in trading volume. Stablecoins, such as Tether (USDT), which launched in 2015 and is pegged to the US Dollar, are designed to maintain a stable price. Despite Bitcoin's struggles, Tether’s trading volumes remained stable, showcasing continued demand for cryptocurrencies.
According to Kaiko, Bitcoin’s volume on Binance has dropped significantly since 2018, from holding 90% of the volume at its peak to now hovering around 10%.
Additionally, reports show that many investors liquidated their long positions, which contributed to a sell-off in BTC. However, Tether's stability in trading volume highlights the ongoing interest in crypto markets despite the volatility.
Visa reported a staggering $2.5 billion in crypto-related transactions during Q1 2022, demonstrating that demand for cryptocurrencies is still robust despite market fluctuations.
Crypto Regulation Concerns
While Bitcoin shows signs of recovery, regulatory concerns remain a major challenge. Russia’s government is shifting towards regulating the crypto market rather than enforcing a complete ban, a position backed by President Putin, who sees crypto mining as a competitive edge for Russia.
Fitch Ratings warned that banning cryptocurrencies could stifle innovation and hinder the technological development of Russian banks. Meanwhile, rumors suggest that the Biden administration is preparing to issue an executive order on cryptocurrencies, potentially as soon as next month. This move is seen as an effort to address what the US government views as national security risks related to cryptocurrencies.
The outcome of these regulatory developments will play a crucial role in determining whether Bitcoin and other cryptocurrencies can recover from recent losses. It’s also worth noting that NFTs are expected to be subject to regulation as well.
Will Bitcoin Bounce Back?
From a technical perspective, it’s hard to predict a clear path to recovery. While Bitcoin has posted some recent gains, it needs to firmly break above the $42,000 mark to signal a more substantial recovery. The BTCUSD daily chart currently shows a pattern of lower highs and lower lows, suggesting an established downtrend.
As regulations continue to evolve, there may be more partnerships and decentralized exchanges (DEXs) emerging in the market, which could positively impact Bitcoin's price in the short term. Currently, the BTC Long/Short ratio is nearly balanced, with a slight inclination towards long positions.
The ongoing shutdown of crypto mining operations in Kazakhstan, expected to end in February, is another factor to watch. The state electricity provider, KEGOC, blamed crypto mining for a large outage in the country. While this is different from the impact of oil rigs being shut down, the resumption of crypto mining may have a positive effect on Bitcoin’s price. However, it may take a few weeks before we see any significant impact.
In addition, Armenia is planning to make an old thermal plant available for crypto mining, which could further support Bitcoin’s recovery as mining operations ramp up in other regions.
Conclusion
In summary, while the short-term outlook for Bitcoin may be bearish, the broader fundamental factors suggest potential for recovery. Partnerships and regulatory changes could drive short-term volatility, with the market likely to remain active until these regulations take shape. As of now, Bitcoin is trading at $37,830, with its future largely dependent on both market sentiment and external developments in crypto mining and regulation.$ETH
