On Thursday, November 10, the crypto market continued to fall at a time when the community was faced with the consequences of the lightning collapse of Sam Bankman-Fried’s business and Binance’s rejection of plans to buy out the long-suffering FTX exchange to save its users’ deposits. Ironically, exactly a year ago on the same day, the bitcoin exchange rate updated the historical maximum (ATH), reaching $69,000.
On the night of November 10, the price of bitcoin (BTC) dropped to $15,742. At the time of publication, the rate of the first cryptocurrency was at $16,000. Such values of the BTC price have not been observed since November 2020, which became the beginning of a bullish period in the market, following which BTC reached maximum heights. To date, the state of the market has changed dramatically: the general negative attitude of investors has erased almost $ 100 billion of the total market capitalization of all digital assets in just 24 hours.
The total capitalization of the crypto market as of November 10 is $856 billion, and this is the lowest figure since January 2021. According to Coinglass, over the past day, margin positions worth $591 million were liquidated, of which more than 50 million fell on the Solana (SOL) coin. Undoubtedly, the news background of the market is primarily related to the collapse of the FTX, as well as the macroeconomic situation.
A year ago, analysts attributed the record growth of bitcoin and other cryptocurrencies to different narratives. The consequences of “halving”, hedging against inflation, approval of exchange-traded funds, technical updates — all these and not only were considered reasons for growth.
Halving is a twofold reduction in the reward to miners for a block extracted in the blockchain, embedded in the bitcoin code. Initially, miners received 50 BTC, on November 28, 2012, the number decreased to 25 BTC, on July 9, 2016 — to 12.5 BTC, on May 11, 2020 — to 6.25 BTC. The next reduction to 3,125 BTC is expected ~ in May 2024.
In general, since the end of spring-summer 2020, most analysts predicted bitcoin growth simply for the reason that the stock market, especially the technology sector, was growing against the backdrop of multibillion-dollar injections into the US market to stimulate the economy during the COVID-19 pandemic.
The current collapse of the crypto market was also predictable, taking into account stagflation, the curtailment of the economic stimulus program, the growth of the key rate in the United States and Europe, as well as the collapse of crypto landing platforms after the collapse of the Terra ecosystem.
The main theory in the market is the binding of global trends to bitcoin halving. Thus, a self-sustaining narrative of a four-year cycle in the crypto market is formed, which investors adhere to one way or another.
Why Bitcoin may rise in price by the next halving — analyst’s explanation
A private presentation of this narrative was published by a Dutch analyst now widely known among crypto investors under the pseudonym “PlanB”. He selected the necessary parameters and applied the Stock-to-Flow (S2F) standard model in the crypto market. In short, its essence boils down to the fact that a resource with a finite supply will become more expensive by a certain algorithm due to the shortage that occurs on the market.
When to expect new highs
If we draw an analogy with previous growth cycles, the bullish period in the market will gradually gain momentum on the eve of halving, and the main effect of halving will be for 12 months after the reduction of remuneration, that is, for the winter of 2024-2025.
According to the same model of self-fulfilling prophecy about the four-year cycle of the crypto market, the coming months will be moderately negative for long-term investors. If we expect the market to continue to obey previously defined laws, then we expect 1.5-2 years of correction before the start of growth.
