• Bitcoin price could go as low as $9,550 and form a macro bottom before rallying to $30,000 by mid-to-late 2023.
  • Miners are already facing the brunt of the recent crashes and are capitulating, bottom could be around the corner.
  • On-chain metrics are already showing signs of heavy accumulation as 2022 comes to an end, suggesting that good things await BTC.
  • Improving macro outlook and reduction in inflation could see a flood of investors re-entering crypto space, starting a new cycle.

Quite a few things happened in 2022, so let’s quickly recap three main events that caused Bitcoin (BTC) price to nosedive during the year.

These are the three main events that caught investors off guard in 2022:

  1. Bitcoin price signaling the end of bull run: BTC hit an all-time high of $68,997.75 on November 8, 2021. But the big crypto produced a major shift in market structure by producing a lower low on the weekly timeframe at $32,995 on January 24. This move confirmed the start of a bear market.
  2. Terra-Luna-3AC crash: As Bitcoin price trickled lower, it was followed by the downfall of the algorithmic stablecoin Terra and its constituents in May. This move caused BTC to shed 30% of its market value in less than two weeks. As a result of this sudden market crash, the overleveraged crypto hedge fund Three Arrows Capital (3AC) faced an untimely demise, which pushed the market down from roughly $30,000 to $17,600.
  3. The FTX debacle: The most recent and fresh wound that the crypto market suffered is the bankruptcy of the FTX exchange and its related subsidiaries. The collapse of Sam Bankman-Fried’s empire came at the hands of his opponent and rival Changpeng Zhao (CZ), who is the founder of Binance. 

As a result of these three events, Bitcoin price crashed 77.57% from its all-time high of $68,997.75. Despite these fateful outcomes, BTC started looking bullish on November 9. So, let’s take a quick look at what the pioneer crypto’s technicals look like.

Bitcoin price hints bullish short-term outlook but with doubt

Bitcoin price revealed a bullish divergence on the three-day chart on November 9 and has been bullish in that timeframe ever since. After this setup was pointed out by FXStreet, BTC rallied 19% and set up a local top at $18,400.

Going forward, Bitcoin price has three outlooks

  • Form a local top at roughly $19,300 and retrace lower to form a macro bottom.
  • Overcome the $19,000 to $20,000 hurdle to reach $25,000 and $28,000 hurdles.
  • Continue the ongoing descent and find a macro bottom between $11,898 and $9,453.

BTC/USDT 1-week chart

BTC/USDT 1-week chart

The state of Bitcoin miners

Before we get too deep into technicals, let’s take a quick look at miners, who are essentially the backbone of the Bitcoin network. Due to the crypto winter, miners have already suffered two major capitulations – the first one extended from June to August, and the second one started in late November and is still ongoing.

Judging from the historical miner capitulations and Bitcoin price bottoms, the current cycle’s bottom should be around the corner.

The recent drop in difficulty comes around the time Argo Blockchain, one of the big names in the Bitcoin mining industry, fell. As a result of this, trading of ARBK was suspended in the United Kingdom and the United States exchanges on December 9, which coincides with a large drop in mining difficulty.

This plummet in mining difficulty has taken some pressure off the miners, but at the same time, it has also marked the continuation of their capitulation wave. So, a quick downtrend is not outside the realm of possibility for Bitcoin price.

The miner reserve indicator provides an estimate of the number of BTC held by these participants, and it is currently hovering around 1.84 million BTC, worth roughly $30 billion. Therefore, a continuation of the distress faced by miners could result in more selling pressure, causing Bitcoin price to drop lower.

BTC miner reserve 

BTC miner reserve 

On-chain metrics breathe sign of relief for Bitcoin 

The first and perhaps the most important on-chain metric to determine the possibility of a capitulation is the 365-day Market Value to Realized Value (MVRV) indicator.

This on-chain metric is used to determine the average profit/loss of investors that purchased BTC over the past year. Based on historical data, the bottom for BTC occurred when the MVRV value slipped below -40%. 

The nosedive in June and the flash crash in November have caused the 365-day MVRV to hit -45%, which coincides with the 2020 level. However, the on-chain metric is still far away from the 2018 and 2014 levels. This data indicates that a minor downtrend could be likely for Bitcoin price going forward. 

BTC 365-day MVRV

BTC 365-day MVRV

Whales and their accumulation patterns are important to determine if the Bitcoin price has bottomed. Historical data shows that addresses holding between 100 to 10,000 BTC have sway over Bitcoin price. The number of these addresses spiked from 15,662 to 15,989 in the last month, denoting an addition of 327 new addresses.

The last time these investors were active was in February when the number of addresses inflated by 274 from 15,870 to 15,596. This move was followed by a $10,000 spike in Bitcoin price from roughly $37,400 to $47,050.

Another interesting data point was between September and November 2021, when these addresses grew from 15,777 to 16,150, suggesting the addition of 373 new addresses. After this spike, the Bitcoin price rose from $40,700 to 66,971 and set up an all-time high.

If history were to repeat itself, this recent accumulation by whales could generate a quick bear market rally in Bitcoin price. This move would correspond to a retest of $28,000, assuming BTC inflations by $10,000 as it did in February. 

BTC supply distribution

BTC supply distribution

While the accumulation of BTC is important, the presence of stablecoin-holding whales is more significant to determine and add weight to the possibility of a rally in Bitcoin price.

For this purpose, we will take a look at the number of addresses holding between $100,000 and $10,000,000 stablecoins. The tokens in question include – Tether US (USDT), DAI, USD Coin (USDC) and Binance USD (BUSD).

As seen in the chart below, the USDC and BUSD whale addresses holding between 100,000 and 10,000,000 US Dollars started increasing their holdings after the initial fallout of FTX in November's first week. For USDT and DAI, these addresses started accumulating around the first week of December. 

Clearly, these whales are accumulating for a rainy day, and a potential drop in Bitcoin price to $9,500 would be a perfect scenario to kick-start a new cycle.

Stablecoin supply distribution

Stablecoin supply distribution

Crypto mining provides innovative way of hedging BTC bets in 2023

Cryptocurrency mining has taken off explosively since mid-2016 with the S9 ASIC miner. The evidence can be found in the Joules per Tera Hash improvement of mining rigs since 2009. Crypto mining equipment has become 4,237% more efficient in the last eight years.

Bitcoin hash rate hit a new all-time high of 272 million TH/s in November 2022, which is a 400% increase as compared to the hash rate in October 2018. The latest in the line of ASIC miners include the Antminer S19XP, which has a 5-nanometer chip, which is magnitudes smaller than a human hair.

Mining rig efficiency

Ethan Vera of Luxor pool stated that if there is another miner capitulation wave, the price of Antminer S19XP would counterintuitively go up. 

As more miners with older rigs become unprofitable, they would want to upgrade, which would cause an influx of capital into buying the latest S19XP, causing its price to inflate. 

Vera details that if the hash price, a metric used to determine the US Dollar revenue a miner earns per unit of hash rate, drops 20%, it would create a demand. According to Blockware Intelligence, the hash price for S19XP calculated at $20,000 per BTC is $0.09. 

Apart from providing positive cash flow to the holder, the market value of the miner would go up, making it an innovative hedge, should the Bitcoin price drop further lower from the current position.

Antminer S19 price

Antminer S19 price

With all these aspects in mind, let’s take another look at Bitcoin price and its 11-year history.

Concluding thoughts on Bitcoin price, logarithmic regression, market bottoms and 2023 target levels

If logarithmic regression is applied to Bitcoin price history for the last 11 years, it reveals an interesting pattern. As seen in the chart, BTC bottoms as it enters the green bands, which starts with an accumulation and is followed by a reversal in trend. 

So far, all the cycles for BTC, except cycle 3, have bottomed above or around the green bands. Currently, Bitcoin price is at the middle band of the regression line, indicating that the bottom could be close. However, there is also a possibility that the big crypto could slide lower and tag the third band of the regression.

BTC/USD 1-week chart

BTC/USD 1-week chart

A closer look at the regression lines reveals that the bottom band is present at roughly $11,898, which coincides with the forecast seen from a technical perspective. To predict the targets for the next run-up in 2023, let’s assume this cycle reverses after forming a local bottom at $11,898. Using the Fibonacci Retracement tool from the all-time high to the aforementioned bottom reveals a few important targets: 

The midpoint of the Bitcoin bear-market retracement at $28,092, which also coincides with the levels predicted from a technical perspective at the start of the article. The $28,000-to-$30,000 range is likely to occur for Bitcoin price in mid-2023.

Potential all-time highs at $112,090.32 and $210,252.31, which are the result of the negative 27% and 62% retracement levels. The timeframe for these targets is late 2023 and 2024.

BTC/USD 1-week chart

BTC/USD 1-week chart

So the cycle 5 Bitcoin price has already started to look impressively bullish.

Nine Bitcoin predictions for 2023

  1. Expect one last capitulation wave, caused either by miners or due to the fallout from the traditional finance space.
  2. This downtick will knock Bitcoin price to a low of $9,500, but the minor detour will not matter in the long run as technicals and on-chain metrics are starting to look extremely bullish.
  3. Dollar-cost averaging from the current level to $9,500 (should BTC go lower) is the best way to go at it instead of trying to catch the bottom.
  4. Expect a further slowdown in interest rate hikes as inflation slides lower. 
  5. The US Federal Reserve could stimulate the economy by printing money. This development could draw more investors to borrow, triggering the start of another rally in stocks and crypto markets. 
  6. Russia vs. Ukraine will reach a conclusion or a truce. The next step could include reversing policies related to Bitcoin mining, making mining more politically palatable. 
  7. Brazil and other South American countries will implement crypto-friendly regulations and becomes a safe haven for the growth of the crypto industries.
  8. As the market picks up steam, it will attract more investors and more capital, thrusting the total crypto market capitalization to $6 trillion and higher. 
  9. Major developments will occur with Ethereum, ZK-snark technology and the Web3 section of the crypto space.

 


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