Bitcoin (BTC) Price Under Bearish Pressure, May Fall to $10k Soon! Here’s why
In November, the US consumer price index (CPI) rose 0.1% from the previous month, lower than 0.4% in October. This is a sign that the Federal Reserve’s efforts to bring down inflation are making progress.
The data also boosted cryptocurrency prices, as less worrisome consumer price increases could give the Fed more room to relax rate hikes. Annual CPI growth was 7.1%, according to the Labor Department, below the 7.3% forecast by economists in a FactSet survey.
How was the crypto market affected by the report?
The largest cryptocurrency by market capitalization, Bitcoin (BTC), has been relatively stable in December. However, it saw a 1.6% gain in the minutes after the CPI data news was released, reaching above $17,930. The native Ethereum cryptocurrency Ether (ETH) has also seen gains, rising 6.9% in the past 24 hours, reaching $1,335.
Sigel’s prediction
Despite the positive news on the CPI data, investment giant VanEck predicts that Bitcoin (BTC) may continue to face challenges as some miners may go bankrupt, overshadowing the overall favorable macroeconomic conditions.
VanEck’s head of digital asset analysis, Matthew Sigel, predicts that the “crypto winter” will reach its lowest point in the first quarter of 2023 when Bitcoin’s value falls to between $10,000 and $12,000. This prediction is based on factors such as the potential collapse of FTX and inflationary stress.
How do miners affect BTC prices?
Bitcoin miners have faced a challenging year, with rising costs and falling prices.
Miners’ income is tied to the price of Bitcoin because they receive it as a reward for solving complex mathematical problems to validate blockchain transactions. These rewards are often sold to fund operations.
When the price of Bitcoin falls, as it has this year by 61%, weaker miners can sell their reserves, which can cause the price to fall further. This cycle of sales and falling prices, known as a “death spiral”, can lead to the collapse of some mining operations.
In order to survive, miners may be forced to sell their coins. Since July, miner balances have fallen by $444 million, to 1.818 million BTC. This trend may continue as most mining companies are currently unprofitable.
“Nearly all MVIS Global Digital Assets Mining Index components are burning cash and trading below book value. Due to rising electricity costs and declining Bitcoin values, we believe many miners will be restructuring or consolidating,” Sigel wrote.
2023: Will The Pump & Dump Continue?
From an all-time high of $69k in November 2021, the BTC price would fall to a low of $12k the following year. Bear markets of late have bottomed out at about 85% of previous highs.
According to Sigel, the bitcoin price will reach $30,000 in 2023.
To conclude
While a CNBC survey indicated that only 8% of Americans have a favorable view of cryptocurrency, VanEck analysts believe that Bitcoin has potential in emerging markets. At a media event this week, VanEck highlighted the fact that 2.5 billion people live in countries with more than 7% inflation, while 15 currencies have fallen by more than 20% so far this year.
Matt Sigel, VanEck Global’s head of digital asset research, believes that 2023 could be a hopeful year for cryptocurrency, but the “crypto winter” must be overcome first.
