Bitcoin BTC Heading Back to Sunny Days in January 2023?
2022 doesn’t really offer any respite for the cryptocurrency market. It keeps the entire ecosystem in reserve even when the final cheer is near. 2023 could be softer, especially for bitcoin (BTC), which has suffered from cascading market failures. Indeed, bad weather continues to befall the queen of cryptocurrencies. Let’s see together that next January will bring more clarity to the currency created by Satoshi Nakamoto.
The current analysis was developed in collaboration with Bitget cryptocurrency platform. Bitget is an exchange operating in more than 100 countries With a user base of over 8 million, the digital asset platform offers a variety of services to its clients. These include derivative trading, spot trading, social trading and copy trading. Thanks to its innovative products, Bitget appeals to both amateurs and professionals.
Increasing pressure on CEXs
CEX (Centralized Exchange) news is not the brightest this year. Thus, the CEX universe is disrupted by successive scandals like FTX.
The specter of contagion pervades the entire cryptosphere. As a result, more and more users decide to follow the famous phrase to the letter “Not your keys, not your coins”. In other words, cryptocurrencies are withdrawn from DEXs (Decentralized Exchanges) or CEXs for hard wallets.
Some see proof-of-reserve or Proof-of-Reserve (PoR) as the holy grail that will restore user confidence. This is the case of Binance, which offers it as collateral for its solvency.
However, it should be noted that PoR does not include negative balances, in other words, debts. Therefore, they are partially transparent and cannot provide a complete picture of CEX’s solvency.
Binance continues to make waves
Recently, Binance has been in the news. So the platform is at open war with the Kraken. In addition, CEX faces a massive pullback at the end of the year. Additionally, Mazars’ announcement to stop PoR audits of cryptocurrency clients didn’t help matters.
Data provider Glassnode compared evidence of Binance’s self-reported reserves of 359,300 BTC with its estimated total reserves of 584,600 BTC. Therefore, we can conclude that the first CEX is not a champion of transparency.
Binance’s set of cryptocurrencies in stock is as follows:
As if all this wasn’t enough, Binance has to face a complaint from 15 French investors. It’s not going well across the Atlantic. According to CoinGeek, Binance.US Binance.com is not independently controlled by any entity.
Binance’s popular CEO, Changpeng Zhao aka CZ, has stepped up to discuss the reasons behind the hostility towards the world’s leading exchange. In an armada of tweets, the platform blames the outside world for rumors of bankruptcy.
Bitcoin (BTC) at the bottom of the wave?
The timing of all this news around CEX and Binance in particular is not good for bitcoin (BTC). For example, the price of cryptocurrency queen is not the best:
After the announcement of Binance’s massive pullback, the price of BTC has struggled to rise so much that it’s safe to say that it hasn’t bottomed out.
January 2023 may confirm this trend with the speed with which the price moves. In such a bottom-up situation, the only alternative is to rise to the surface.
Volatility as a harbinger of a rally
Volatility decreases in the last quarter of this year. For the month of December, bitcoin (BTC) experienced the lowest volatility since the beginning of the bear market. In fact, bitcoin (BTC) last experienced this level of volatility in October 2020:
Let’s take a closer look at what such a level of volatility translates to bitcoin. Perhaps one of the most popular tools among traders is Bollinger Bands. Developed by John Bollinger in the 80s, they are based on cyclical and predictable volatility.
Specifically, they consist of three curves, the middle of which by default represents a simple moving average over 20 periods, the upper curve and the lower curve, each set to 2 standard deviations from the moving average.
Narrowing bands indicate low volatility (M-shaped figure). Conversely, the distance between the bands indicates a high volatility environment (W-shaped figure). This indicator helps to detect trend reversals.
Moreover, according to Bollinger, periods of low volatility precede periods of high volatility and vice versa. In addition, the low volatility environment is conducive to consolidation. In other words, the price is currently stabilizing like bitcoin (BTC).
We better understand the tendency of traders to accumulate. According to Glassnode’s latest weekly column, there is a growing trend favoring holding bitcoin (BTC) for the long term. Thus, 72.3% or 13.9 million bitcoins in circulation are held by long-term holders.
Like a deja vu effect for Bitcoin (BTC).
14 years have passed since BTC was founded. Despite the apparent youth of Satoshi Nakamoto’s currency, its cyclical aspect cannot be ignored.
November 2018 saw a low level of volatility before the bear market. Similarly, history repeated itself in September 2020, when low volatility preceded a meteoric rise in price.
Goldman Sachs analysts agree. Moreover, CNBC also confirms it. In fact, slowing volatility is not necessarily a bad sign.
At the end
2022 is redefining cards in the crypto ecosystem. Thus, it will leave an indelible mark until the end. However, variables such as volatility point to a signal bull market. The parallel with 2018 and 2020 cannot be overlooked. If the low price trend is confirmed, the forecast for the beginning of the year is encouraging. What could be better to enter the new year than a change of trend? This opportunity to step back for a better jump could be a game changer for bitcoin (BTC).
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As a financial professional, I consider blockchain to be a true revolution due to all its innovations that have a global impact. I participate in this new digital era through my articles.