Many were optimistic about the future outlook for the cryptocurrency market after the US’s monthly inflation rate announcement on Tuesday confirmed the easing of the Federal Reserve’s tightening monetary policy. However, investment firm VanEck believes that a wave of miner bankruptcies could cause the price of Bitcoin to fall in the first quarter of 2023.
To Report As many miners are likely to go bankrupt, which casts a shadow over improving macroeconomic conditions, Bitcoin’s downward trend is likely to continue, says US investment giant CoinDesk Van Eck.
Matthew Sigel, Head of Digital Asset Research at VanEck, stated in the institute’s 2023 Vision Report:
Bitcoin will test the price of $10,000-12,000 in the first quarter of 2023 amid a wave of miner bankruptcies, which will mark the end of digital currency winter.
This year, Bitcoin miners have been caught up in the increase in mining costs and the decrease in the price of Bitcoin.
The profitability of miners is closely related to the price of Bitcoin; Because they receive this digital currency as a reward for solving complex mathematical puzzles aimed at verifying transactions on the blockchain. Miners often convert their received bitcoins into cash to cover mining costs.
Thus, the fall in the price of Bitcoin, as it has fallen by 61% this year, leads to the surrender of miners. A situation where weaker miners exit the market and sell their bitcoin reserves, causing the price to fall further. In the worst possible scenario, miners giving up could lead to a death spiral or a downward spiral of demand.
Miners are spending their coin reserves to cope with adverse market conditions. Data from blockchain analytics firm Glassnode shows that miners’ wallet balances have fallen by more than 25,000 bitcoins (about $444 million) since July, to a 14-month low of 1.818 million. The Bitcoin unit has arrived.
Since most companies active in the field of Bitcoin mining are facing a liquidity crisis, this trend can continue.
Now, the median market cap of the global digital asset mining index is only $180 million, with almost all sectors in a liquidity crunch and trading their assets well below their true value. Considering that Bitcoin mining has become largely unprofitable, taking into account the increase in the price of electricity and the decrease in the price of Bitcoin, we anticipate that many miners will make structural changes or merge with each other.
Bitcoin’s fall to $12,000 represents an 82% drop from the all-time high of $69,000 that the market hit in November 2021 (Aban 1400). In the previous two bear markets, we saw a price drop of about 85% compared to the highest historical record of that time.
However, Siegel expects the price of Bitcoin to return to the $30,000 range in the second half of 2023.
Lower inflation, easing energy concerns, a possible ceasefire in Ukraine and a turnaround in the less liquid part of the money supply will trigger a new bull market.
Siegel has also predicted that in the future, an oil exporting country will add Bitcoin to its sovereign wealth fund.
Other important predictions
Van Eck expects financial institutions to tokenize more than $10 billion in Chinese non-blockchain assets and a new decentralized stablecoin to reach a $1 billion market cap.
The investment giant also envisions Brazil becoming one of the world’s biggest cryptocurrency-loving countries and tokenizing part of its government debt on the blockchain. Finally, Ethereum allows the withdrawal of deposits from Beacon China (a new proof-of-stake network).