Bitcoin had a strong start in January 2023 but has since slumped down under the influence of external factors. Inflationary pressures are the most significant issue, as the unstable global economic situation doesn’t let any asset market evolve well. Investors who buy Bitcoin with credit card prefer hodling instead of short-term ownership as a result, since this method yield better returns. Add to that the postponement in a decision regarding the spot ETFs, and you have a very clear picture of a marketplace that has been enduring considerable challenges to stay afloat.
As a result, on August 17th, the BTC price suddenly dropped, to the detriment of the steady gains it had been accumulating for a couple of months, albeit slowly. Investors were once again forced to admit that the bearish tendencies were stronger and that the bulls weren’t strong enough to sustain above the $25k level. Now, even further drops in value are expected, but some believe there are still reasons to remain optimistic.
Following the standard four-year cycle, Bitcoin is approaching the next halving event. Traditionally, this event has been positively correlated with price growth, leading many to expect that it will be the nudge that finally sets Bitcoin decisively forward and ends its period of stagnation. However, some are confident that BTC will also grow until then.
This is in line with historical trends, as Bitcoin accumulated value both before and after the halving, helping values over a longer time. Assuming there will be no black swan event, some analysts consider that by the end of 2023, Bitcoin could finally breach through the $30k milestone and even reach $35,000. During the pre-halving days in Q1 of 2024, the values could skyrocket to $46,000 in a relatively short time.
However, the path to those values won’t be easy to achieve, and things will likely worsen before they improve. The predictions estimate a drop ranging anywhere between $22,000 and as little as $20,000, where Bitcoin will probably reach a support level. This is good news for the bears, who now benefit from the market slowdown that intervened after the SEC ruling on ETFs.
However, those waiting for the decision are convinced that they will still get their answers and that it is more a matter of when it will arrive rather than “if.” The longer inflation remains high, the less disposable income there is available for retail investors. The capital costs have also increased due to the risk-free rates of return becoming more elevated. That means that asset allocation becomes less attractive, especially towards holdings that are believed to be riskier.
If this remains the case for an extended period, Bitcoin will likely record more losses. In that sense, many investors have started wondering what are some of the critical indicators that can allow them to have a more comprehensive view of how prices will unfold. While it’s impossible to make 100%, entirely accurate price predictions, you can look at the directional price momentum and the market positioning, including the open interest and funding rates indices.
NFT to BTC
Non-fungible tokens are a development of the Ethereum blockchain. The ETH platform developed and then hosted them through the hype of the late 2010s when many flocked to the asset class due to its exclusiveness. Some NFTs were purchased for hundreds of thousands and even millions of dollars, launching a debate about whether the prices are fair or inflated.
The market’s appetite for NFTs dwindled after a while. After the introduction of Bitcoin Ordinals, which are more or less the same thing, with the main difference being that they are hosted on the BTC blockchain, most of those who were previously fans of the NFTs switched to this new asset class. Now, it seems that there are even some NFTs that are dissatisfied with Ethereum’s performance. On September 7th, the OnChainMonkey team announced they would move their 10,000 NFTs from Ethereum to Bitcoin.
The project includes their entire collection and is expected to last at least a few months. The costs are also considerable, as the platform is expected to pay more than $1 million to complete the process. The main reason for the move is that the protocol for the Bitcoin Ordinals is designed for higher security and better decentralization. The proposal was passed by 99% of the company’s tokenholders, showing that the community had a very high conviction to move to Bitcoin.
The migration procedure is complex so that holders can have a better experience. The plan is for holders to receive the corresponding Ordinal once they’ve burned the Ethereum NFT. The move could also benefit the Ordinals space since it could lead to a rejuvenation of the sector, which has recorded plunges in transaction volume of approximately 98% between May and mid-August.
Fintech in Australia
An Australian fintech company has developed plans for the launch of crypto-based products. This is even though it is currently embroiled in a legal battle with a financial regulator for the alleged offerings of financial products in the absence of a license. The new development would allow Aussie investors to use digital money as collateral when borrowing cash.
The initial rollout is expected towards the end of September, and only Bitcoin will be used as part of the loans. A co-founder disclosed that the products have been designed in a conservative way to allow them to fit neatly into an existing licensing model. The company also hopes that it won’t take more than eighteen months from now before there’s more clarity on the issue of regulations.
The increasing speed of these processes in other jurisdictions, including the United Kingdom, Singapore and Hong Kong, will also likely determine Australian authorities to develop a comprehensive plan for digital finance. Australians were among the early starters in the cryptocurrency industry and were also essential targets for scammers. So far, regulators seem to be decidedly pro-crypto, meaning that legislation is more likely to push for innovation and extension rather than for stifling the environment.
Cryptocurrencies have continued to develop over the years and changed from niche assets to an essential part of many portfolios. Despite the challenges, they seem set to continue thriving.