Crypto Weekly: Bitcoin is close to a 2-year low Crypto Weekly: Bitcoin is close to a 2-year low Crypto Weekly: Bitcoin is close to a 2-year low

Crypto Weekly: Bitcoin is close to a 2-year low

Mads Eberhardt

Cryptocurrency Analyst

Summary:  Bitcoin has almost wiped out its return in the recent bull market as it nears a 2-year low, but a long-awaited decrease in the hash rate of Bitcoin offers miners some relief.


Bitcoin is close to a 2-year low price

As fear spread in early November following the collapse of the crypto exchange FTX, the Bitcoin price realized a new local bottom of about 15,500 (BTCUSD). The latter was nearly a 2-year low for Bitcoin. In the following weeks, Bitcoin recovered slightly before declining again, as it presently trades at 16,200. If Bitcoin were to go below 15,500 at this moment, it would trade at a 2-year low because time simply caught up with Bitcoin, as the latter surged throughout November 2020. Bitcoin seems to be trading in the range 15,500 and 17,000 for now, but in case Bitcoin breaks its support of 15,500, the next level of support is around 12,300.

In the recent crypto bear market of 2018 and 2019, the Bitcoin price bottomed out in December 2018 more or less exactly a year after hitting an all-time high in December 2017. In case it is to be repeated in this bear market, it should be true that Bitcoin’s local bottom was at 15,500, which price was achieved more or less exactly a year after Bitcoin’s all-time high in November 2021. However, this time around, given that the macro situation is much worse, the interest rates are rising, and the printers of central banks have run out of ink are not promising for the potential scenario that Bitcoin has already bottomed out.

Speaking of the past, Bitcoin greatly outperformed any other cryptocurrency in 2018. Yet, in the current bear market Ethereum has managed to keep up with Bitcoin so far. At the moment, Ethereum trades at around 0.072 against Bitcoin. The latter was more or less the average price of this trading pair in all of 2021. It seems the less issuance of new Ether following the Ethereum merge and the greater demand for Ethereum-based transactions due to a greater ecosystem are what keep Ethereum close to Bitcoin. This is particularly of interest in case we at some point experience a bull run similar to 2017 and 2021. In that case, Ethereum may greatly outperform Bitcoin. Ethereum trades at 1,170 (ETHUSD), still far from its 2-year low.

The Bitcoin hash rate offers miners some relief

We wrote last week about Bitcoin’s ever-increasing hash rate in the past year, although the Bitcoin price has been on a constant downward trajectory. This is contrary to what is expected to be the case, namely that the price and hash rate should be positively correlated, as miners can afford to operate more computational power in times with a high Bitcoin price. The lower price but higher hash rate has pushed many miners into financial trouble.

In the past week, however, miners could sense some relief on the horizon. Over the past week, the hash rate has decreased by around 10%, potentially decreasing further in the foreseeable future. This makes it more profitable for miners to mine Bitcoins and may delay consolidation between miners, which would make the network more centralized.

Bitcoin hash rate (blue line). Source: Blockchain.com
Bitcoin/USD - Source: Saxo Group
Ethereum/USD - Source: Saxo Group
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.