Decentral Block Post

Crypto traders had a brief opportunity to pause and take stock of where things are on June 16 as the relentless selling that has hammered Bitcoin (BTC) and the wider market over the past week began to relent despite an ongoing sell-off in the traditional markets. 

Data from Cointelegraph Markets Pro and TradingView shows that after climbing to a high of $23,000 in the early trading hours on June 16, the price of Bitcoin slowly trended down on diminished trading volume to hit a low at $20,765.

Here’s what several analysts in the market are saying about the outlook for Bitcoin moving forward as crypto traders try to determine if the bottom is in or if there is more downside ahead.

Expect multi-month consolidation at the 200-week MA

A macro perspective of the journey that Bitcoin has taken over the years and how its past can offer insight into the current market setup was discussed by analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart highlighting BTC’s behavior near its 200-week moving average (MA).

Rekt Capital said,

In the summer of 2021, the Chinese government banned Bitcoin (BTC) mining and cited the typical concerns of harmful environmental effects and money laundering. Now, the Chinese government is working toward establishing its own digital yuan currency. This raises the question as to whether the original reasoning was merely a Trojan horse.

This ban could easily have been a huge blow to Bitcoin’s momentum. After all, close to 75% of all Bitcoin mining had been conducted in China by late 2019, according to Cambridge Alternative Finance Benchmarks. If the network teetered under the weight of China’s nationwide ban, other governments might have begun to think that Bitcoin could be defeated after all.

China’s ban was Bitcoin’s stress test

For a brief period, the ban worked as intended — by the end of June 2021, the Bitcoin network’s hash rate had dropped to 57.47 exahashes per second (EH/s), down by a few multiples. However, the hash rate rebounded to 193.64 EH/s by December 2021 and by February 2022, it reached an all-time high of 248.11 EH/s.

The entire ordeal was a test that Bitcoin passed with flying colors: Banning Bitcoin mining proved as effective as the Prohibition era was at killing drinking culture in the United States.

In early 2022, the obvious explanation for the hash rate recovery was that miners who had set up shop in China had simply fled to the Western Hemisphere. There was plenty of evidence that seemed to support this hypothesis — primarily that the United States’ share of the global hash rate exploded from 4.1% in late 2019 to 35.4% in August 2021.

Venture firm Three Arrows Capital (3AC) has reportedly failed to meet margin calls from its lenders, raising the spectre of insolvency after this week’s crypto market collapse triggered unforeseen liquidations for the Singapore-based company.

Crypto lender BlockFi was among the firms to liquidate at least some of 3AC’s positions, according to the Financial Times. Citing people familiar with the matter, FT reported that 3AC had borrowed Bitcoin (BTC) from the lender but was unable to meet a margin call after the market turned sour earlier this week.

The issues surrounding 3AC appear to have impacted Finblox, a Hong Kong-based platform that allows investors to earn yield on their digital assets. Finblox said it was forced to reduce its withdrawal limits on Thursday due to concerns surrounding the venture firm.

While estimates vary, 3AC likely incurred $400 million in liquidations across multiple positions. The company had significant exposure to Terra (originally Luna, now LUNC) and also held large positions in projects such as Solana (SOL) and Avalanche (AVAX). As Cointelegraph reported, 3AC has spent the past few days moving assets to top up funds on various decentralized finance (DeFi) platforms, most notably Aave (AAVE).

However, this week’s mass liquidations were likely triggered by the collapse of Ether (ETH), which plunged toward $1,000 en route to its lowest level since December 2020. It has also been speculated that 3AC’s exposure to synthetic assets, such as the Grayscale Bitcoin Trust (GBTC) and Lido’s Staked ETH (stETH), was also responsible for the mass liquidation events.

The outlook across the cryptocurrency ecosystem continues to dim as the sharp downtrend that was initially sparked by the collapse of Terra (LUNA, now LUNC) appears to have claimed the Singapore-based crypto venture capital firm Three Arrows Capital (3AC) as its next victim. 

As large crypto projects and investment firms begin to collapse on a weekly basis, the prospect of a long, drawn out bear market is a reality investors are beginning to accept. 

Based on a recent Twitter poll conducted by market analyst and pseudonymous Twitter user Plan C,  41.6% of respondents indicated that they thought the Bitcoin (BTC) bottom will fall between the $17,000 to $20,000 range.

Addresses holding at least 1 BTC hits a new high

In the midst of the heightened volatility and rapid price decline for Bitcoin, many would expect to see traders dumping their holdings and fleeing to the sidelines in a bid to maintain their purchasing power.

While it has indeed been the case that falling prices and liquidations have pushed many traders out of the market, low-priced Bitcoin has also attracted some buyers who have patiently been waiting for the right entry point.

Solana (SOL) tumbled on June 16 amid a broader retreat across the top cryptocurrencies, led by the Federal Reserve's 0.75% interest rate hike a day before.

Solana price rebound fizzles

Notably, SOL/USD plunged nearly 17% to $30 a token, wiping out almost all the gains from the day before. The SOL price volatility liquidated almost $10 million worth of contracts in the past 24 hours across multiple crypto exchanges, data from Coinglass shows. 

The latest declines come as an extension to SOL's broader correction, where it dropped by more than 90% after peaking out near $267 in November 2021. SOL also fell to its lowest level since July 2021 near $25.

In addition, a higher interest rate environment and the collapse of high-profile crypto projects like Terra have strengthened SOL's downside prospects. 

SOL paints "ascending triangle"

Solana's pullback move on June 16 began after testing a horizontal trendline resistance near $34 that constitutes what appears to be an "ascending triangle" pattern.