BTC Down 70% from 8-Month High as Miners Unload Assets
CRYPTO Chart Source: Bloomberg

BTC Down 70% from 8-Month High as Miners Unload Assets

Following a 70% decline since November 2021 peak price, Bitcoin has maintained 2022 lows as inflation rages and stokes recession worries in the United States and other developed markets following global energy pressures.

The oldest digital asset trades below $20,000 level with cryptocurrencies market capitalisation hovering behind $900 billion, shedding some $2 trillion after it peaked at $3 trillion last year.

High mining-energy costs force miners to sell digital assets even as crypto block rewards lost value while corporate purchases slow down.

In a report, Coinbase said another month, another scorching hot inflation reading announced yesterday which saw the consumer-price index increased 9.1% from the year before — meaning shoppers paid sharply higher prices for everything from groceries to gasoline to rent.

The report said the higher-than-expected reading immediately spooked crypto and stock markets, as Bitcoin dipped 5% and the S&P 500 opened down 1%.

Elsewhere, the liquidity crisis gripping crypto firms Three Arrows Capital and Celsius continued to cascade through the market. But it’s not all bad news this week.

Forty-year-high Inflation, and the Fed’s efforts to fight it, are pressuring both stock and crypto markets — and sparking recession concerns, according to Coinbase report.

June’s historic 9.1% year-over-year spike in consumer prices outpaced the 8.8% Dow Jones estimate and coincided with the biggest yield curve inversion (a key recession indicator) between 10-year and 2-year Treasury notes since 2000.

The latest inflation report likely means another interest rate hike is on its way from the Fed, which has been accelerating efforts to unwind pandemic-era stimulus.

Riskier assets like crypto and tech stocks that formerly benefited from excess consumer cash have seen some of the steepest declines as a result, according to a Coinbase report.

It said two months after the Terra/Luna collapse, liquidity and credit issues continue to ripple through overextended crypto firms including Three Arrows Capital (3AC), Celsius, Voyager, and more.

After filing for bankruptcy on July 1, 3AC — which had managed $10 billion — has seen legal sparring between the firm’s founders and its liquidators.

The 3AC fallout has impacted Blockchain.com ($270 million in losses on loans to 3AC), Voyager Digital (which filed for bankruptcy protection after 3AC couldn’t pay back $670 million) and BlockFi.

FTX CEO Sam Bankman-Fried has since “bailed out” the latter two.

Meanwhile, Celsius — one of the first firms to pause withdrawals due to liquidity troubles — paid off massive DeFi loans before filing for bankruptcy protection on Wednesday night.

Bitcoin mining firms are feeling the pressure too. Despite falling crypto prices, global mining power has remained near all-time highs over the past month, meaning mining-energy costs are high even as crypto block rewards have lost value. READ: Bitcoin Miners See 31 Per Cent Jump in Revenue

As a result, some miners are selling their crypto to pay off expenses. Core Scientific, one of the world’s largest miners, sold $167 million of BTC (over 75% of its BTC) to pay for servers and other debt; Canadian miner Bitfarms sold $62 million of BTC (50% of its BTC) to improve liquidity; and Argo Blockchain liquidated $15.6 million to pay off a loan with Galaxy Digital.

On the global adoption front, Italy is subsidizing $46 million for internet blockchain projects, and the Central African Republic announced a new national cryptocurrency, Sango Coin, which will be “the gateway to [the country’s] natural resources,” per its president.

Meanwhile, $5.5 billion of venture capital poured into crypto projects in the first half of the year. Most recently: Axie Infinity developer Sky Mavis launched a $150 million fund for blockchain games, and layer-1 protocol Rubix raised $100 million from a firm specializing in cross-border transactions.

Elsewhere, Ethereum successfully launched proof of stake on its Sepolia testnet, the second of three milestones before the blockchain’s energy-efficient upgrade, called the Merge. Several months into a crypto winter, with BTC down 70% from November’s all-time highs, a big question is percolating: Are we near a bottom?

While some analysts contend that macro factors are key — like the Fed slowing down rate hikes or equity earnings forecasts getting revised lower — others feel that we are already close to the low-end.

“While no one can predict how crypto markets will move, the search for the bottom isn’t just about price levels. As one crypto trader told CoinDesk, “the bottom is as much a product of time as it is price … cynicism must abate to make way for optimism.”

“Holders are less likely to sell BTC in turbulent periods,” was one of the key takeaways from Coinbase Institutional monthly outlook, written by head of institutional research David Duong.

Duong viewed this trend among those holding BTC for more than 6 months as a “positive sentiment indicator” amid broader market weakness. # BTC Down 70% from 8-Month High as Miners Unload Assets